Nigeria’s naira has strengthened markedly in the official foreign exchange market, closing January at N1,386.55 per US dollar its firmest level in nearly two years as a combination of rising global oil prices, steady reserve build-up, and ongoing Central Bank of Nigeria (CBN) reforms continues to support improved FX liquidity and sentiment.
The currency appreciated 2.47% over the final week of January, moving from a high of N1,422.07/$ on January 23 to N1,386.55/$ by month-end. The consistent upward drift reflects greater dollar supply visibility, reduced speculative pressure, and a narrowing premium between official and parallel market rates.
The rally has been bolstered by Brent crude trading comfortably above Nigeria’s 2026 budget benchmark of $64.85 per barrel. On Thursday, Brent futures rose 94 cents (1.4%) to $69.34 per barrel, while WTI climbed 1.5% to $64.13. The gains the third consecutive daily advance stem from escalating geopolitical risks in the Middle East, particularly around Iran, and fears of potential disruption to the Strait of Hormuz, which handles roughly 20% of global oil supply.
Analysts warn that any major escalation could push Brent sharply higher, with estimates ranging from $91 to as much as $150 per barrel in a severe supply-shock scenario. For Nigeria, prices above $69 per barrel generate stronger dollar inflows, support fiscal revenues, and reduce balance-of-payments strain reinforcing the naira’s recent gains.
The CBN’s reform agenda has played a pivotal role. Enhanced supervision, greater transparency through tools like the Electronic Foreign Exchange Matching System, and disciplined liquidity management have helped align pricing across market segments and curb arbitrage. External reserves, recently above $46 billion, provide the central bank with a solid buffer to manage volatility.
Cowry Assets Management, in its latest weekly report, noted that the naira is expected to maintain moderate gains, supported by stable-to-mildly-bullish oil prices, steady non-oil inflows, and a positive trade balance. The firm highlighted that the gradual nature of the appreciation rather than sharp jumps suggests genuine improvement in supply-demand dynamics rather than administrative pressure alone.
The stronger official rate offers tangible relief to importers, manufacturers, and households reliant on FX for goods, education, healthcare abroad, and raw materials. It also helps contain imported inflation and supports broader price stability objectives.
While the outlook remains cautiously positive, sustainability will depend on continued inflows from oil, remittances, and portfolio investments, as well as disciplined fiscal and monetary policy. External risks including potential oil-price reversals or geopolitical de-escalation could influence momentum.
For now, the naira’s breach below N1,400 in the official market stands as a significant milestone, reflecting the combined impact of higher oil earnings and CBN-led FX reforms. Market participants will watch closely to see whether this stability can extend into February and beyond.
