Naira hits 10-month high on strong FX inflows

Naira hits 10-month high on strong FX inflows

The naira extended its gains at the official market last week as it gained 0.72 per cent (or N10.5) to close at 1,455.17/$, the strongest it had been since December 2024, data from the Central Bank of Nigeria has revealed.

Analysts disclosed that the performance of the domestic currency was driven by robust foreign exchange inflows from portfolio investors and remittances.

At the parallel market, the naira strengthened 0.88 per cent to 1,475/$, also supported by improved liquidity.

The FX market had traded mixed through the week. It opened on a bearish note as early demand pressures caused by the exit of Foreign Portfolio Investors led to a dip. However, the market sentiments shifted midweek, buoyed by strong foreign inflows, particularly from FPIs sourcing naira to meet local fixed-income obligations.

AIICO Capital, in its outlook for the new week, said, “The naira is likely to remain stable in the near term, supported by improved US dollar supply and external reserves.”

Cowry Assets Management Limited, in a review of the FX market, said that it also noted that the local currency’s improvement was helped by better foreign exchange inflows, which reduced pressure on demand.

It maintained a positive outlook for the naira, saying, “We expect the naira to stay stable in the near term, supported by steady FX inflows and CBN interventions. However, rising import demand or weaker dollar inflows could slow further gains. Oil prices may remain under pressure due to higher supply, but any rebound in global demand could offer some support to Nigeria’s external earnings conditions, underpinning optimism for FX market stability; volatility in global oil markets may keep investor sentiment cautious.”The external reserves also increased to $42.57bn, helped by higher inflows from oil sales, remittances, and portfolio investments. This steady rise in the external reserves gives the CBN more room to manage short-term pressures and supports expectations of naira stability in the near term.

In the past week, the naira got some cheery news that experts have said would further strengthen the liquidity in the market.  The global index provider, FTSE Russell, in its September 2025 semi-annual country classification review for equities and fixed income, added Nigeria to the Watch List.

Explaining further, FTSE Russell said that the addition to the watchlist makes “possible reclassification from Unclassified to Frontier market status as the market meets the five FTSE Quality of Markets criteria required for attaining Frontier market status.”

Nigeria had been moved to the “Unclassified” category in September 2023 on the back of severe delays in foreign investors’ capital repatriation and FX transactions experienced by foreign investors as of that time.

However, recent policy reforms have improved FX liquidity, with market participants reporting no significant delays, prompting FTSE Russell’s decision. Now on the watchlist means Nigeria will be in a period of formal observation and engagement with market participants ahead of a potential upgrade in the next annual review cycle, expected in March 2026.

The analysts at Meristem Securities said, “This shift repositions Nigeria back on the investment radar for global funds that benchmark against the FTSE.

Frontier market index

Active funds will begin pre-positioning to capture the upside ahead of the formal re-entry, while passive funds will prepare for mandatory future allocations. This translates to potentially significant inflows of Foreign Portfolio Investment over the next year. In addition, this directly supports the Nigerian naira as anticipated capital inflows increase dollar supply, helping to sustain liquidity and stability in the FX market.

“In the short term, anticipation of fund flows is likely to fuel market optimism and price appreciation. However, long-term success depends on the Nigerian government’s commitment to sustaining a market-driven economy throughout this critical probationary period.”

Naira strengthens to 10-month high on strong FX inflows