Naira records first weekly gain as FX liquidity improves
The naira experienced its first weekly increase of the year on Friday within the official foreign exchange market, rising by N7.68 as enhanced liquidity, bolstered by the Central Bank of Nigeria, improved market confidence.
This rise followed an upturn in dollar availability, which surged by 38 percent month on month in December 2025, primarily fueled by increased foreign exchange sales by the Central Bank of Nigeria, as reported by FMDQ data.
Data from the apex bank indicated that the naira appreciated by 0.5 percent week on week, with the dollar priced at N1,423.16 on Friday in the Nigerian Foreign Exchange Market, down from N1,430.84 at the end of trading the previous week.
On a day comparison, the local currency slightly improved by 0.2 percent from N1,419.71 recorded on Thursday within the same market segment.
Throughout the week's five trading days, the naira strengthened by N6.14, rising from N1,429.30 on Monday, which was the year’s first trading day.
In the parallel market, commonly known as the black market, the naira remained unchanged at N1,490 per dollar.
Nigeria’s external reserves, which give the Central Bank of Nigeria the capacity to intervene in the foreign exchange market and manage exchange rate fluctuations, also showed an improvement during this time.
Data released on the Central Bank of Nigeria’s website revealed that as of January 7, 2026, external reserves increased to $45.66 billion from $45.50 billion on December 31, 2025.
This increase marked a 0.4 percent rise and indicated stronger inflows alongside diminished pressure on the foreign exchange market.
Total foreign exchange inflows into the market increased by 38 percent month on month to $2.8 billion in December 2025, representing a recovery from the severe 67 percent drop observed in November.
Despite this recovery, the foreign exchange supply in December remained at the second lowest level in the past 16 months, highlighting enduring fragilities in inflows.
Aside from domestic corporate inflows, which decreased by 5 percent month on month to $420 million, all other sources of foreign exchange supply showed improvements during this timeframe.
Analysts at FBNQuest attributed the rise in foreign exchange supply mainly to heightened activity by the Central Bank of Nigeria in the market.
Foreign exchange sales by the apex bank climbed to $654 million in December, more than double the $318 million sold in the prior month.
According to the analysts, the increased involvement of the Central Bank of Nigeria reflects intentional efforts to enhance market liquidity amid limited participation from offshore investors, as foreign inflows remain relatively weak.
Foreign portfolio inflows saw a modest 7 percent month on month increase to $632 million in December, a significant slowdown compared to the $3.5 billion recorded in October.
The decline in portfolio flows was linked to a weakened risk appetite toward the end of the year, a time when foreign investors typically reduce their deployable liquidity while engaging in profit-taking and adjusting their portfolios.
“We anticipate renewed investor activity in the upcoming months, likely enhancing inflows, supported by appealing domestic carry trade opportunities,” noted FBNQuest analysts.
Regarding the components of inflow, foreign direct investment, the smallest segment, more than quadrupled to $50.1 million in December.
This indicated a 381.7 percent increase from the $10.4 million recorded in the previous month.
Domestically, foreign exchange inflows from exporters, importers, and individuals also contributed to the month-on-month rebound.
Inflows from exporters and importers surged by 49 percent to $683 million, while inflows from individuals rose by 88 percent to $275.3 million.
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