The naira strengthened against the US dollar last week, defying a global rally in the American currency and giving businesses another sign that Nigeria’s foreign exchange market may be becoming more stable.
The naira closed at ₦1,362.09 per dollar in the Nigerian Foreign Exchange Market on Friday, compared with ₦1,380.18 a week earlier.
That represents a gain of about 1.3 percent in one week.
The currency also strengthened in the parallel market, closing at about ₦1,407 per dollar compared with ₦1,412 the previous week.
Ordinarily, a stronger US dollar puts pressure on currencies such as the naira.
This time, however, growing FX liquidity, stronger external reserves and improving confidence in Nigeria’s foreign exchange market have helped the naira move in the opposite direction.
Why the Dollar Is Getting Stronger
The naira’s performance becomes more significant when viewed against what is happening globally.
The US dollar has strengthened against several major and emerging-market currencies as investors respond to expectations that the US Federal Reserve could maintain a more aggressive monetary policy stance.
J.P. Morgan Global Research recently upgraded its outlook for the dollar, while the dollar index traded around 101.3 on Friday, close to a three-week high.
Global trade tensions and geopolitical uncertainty involving the United States and Iran have also increased demand for the dollar as investors move towards assets considered relatively safe during periods of uncertainty.
Normally, these conditions would make it harder for the naira to strengthen.
But Nigeria’s domestic FX market is currently providing some protection.
More Dollars Are Moving Through the Market
One of the strongest factors supporting the naira is improved liquidity.
Foreign exchange turnover in the official market increased sharply during the week.
Turnover reached about $4.2 billion on Thursday, up 119.9 percent from $2.01 billion on Monday.
The number of transactions also increased from 1,216 to 1,348 over the period.
Activity in the interbank market strengthened as well, with turnover rising to $1.43 billion on Friday from $944.16 million at the beginning of the week.
For businesses, higher market liquidity matters.
When more dollars are available in the official market, importers, manufacturers, banks and investors can complete foreign exchange transactions more easily without placing as much pressure on the exchange rate.
That can reduce some of the uncertainty businesses face when planning imports, paying international suppliers or moving investment capital.
Nigeria’s Reserves Are Providing Support
Nigeria’s external reserves are also helping to strengthen confidence in the naira.
CBN data cited by BusinessDay showed reserves at $52.02 billion as of July 23.
CBN Governor Olayemi Cardoso had earlier said gross reserves reached $52.52 billion on July 17, up from $50.47 billion at the end of May.
He attributed the increase mainly to crude oil-related tax receipts and third-party inflows.
The reserve position provides roughly 11 months of import cover, according to the CBN.
Higher reserves give the central bank greater capacity to meet foreign currency demand and respond when the FX market comes under pressure.
They can also improve investor confidence by signalling that Nigeria has a stronger buffer for external obligations.
Why Businesses Should Care
Exchange-rate stability affects almost every part of Nigeria’s economy.
Manufacturers that import machinery or raw materials need dollars.
Airlines need foreign exchange for aircraft maintenance and other international expenses.
Retailers importing finished goods are exposed to currency movements.
Foreign investors also consider exchange-rate risk when deciding whether to bring capital into Nigeria.
A rapidly weakening naira can make planning difficult because companies cannot easily predict how much their future dollar obligations will cost.
A more stable exchange rate gives businesses greater visibility over costs, margins and investment decisions.
It can also reduce the risk that exchange-rate changes will quickly translate into higher prices for imported goods.
What Experts Are Watching
Manpreet Gill, chief investment officer for Africa, Middle East and Europe at Standard Chartered, believes some of the factors strengthening the dollar globally could prove temporary.
He expects support for the dollar to weaken if inflation continues to moderate, geopolitical tensions ease, and US bond yields eventually decline.
For emerging economies such as Nigeria, a prolonged period of dollar strength can create pressure by discouraging capital flows and increasing the cost of imports.
A weaker or more stable dollar would create a more favourable external environment for the naira.
But Nigeria cannot depend entirely on developments in the United States.
Domestic fundamentals remain critical.
Can the Naira Keep Holding Firm?
The naira’s recent performance offers signs that Nigeria’s FX market has strengthened.
But maintaining that stability will depend on whether the conditions supporting the currency continue.
Investors will watch external reserves, FX liquidity, oil revenues and confidence in the CBN’s foreign exchange reforms.
They will also monitor US interest rates, global oil prices, geopolitical tensions and the strength of the dollar.
For now, Nigeria has managed something that would normally be difficult.
The dollar is getting stronger globally, but the naira has strengthened with it.
Whether that becomes a lasting trend will depend on Nigeria’s ability to keep dollars flowing into the market and maintain confidence in its foreign exchange system.
Frequently Asked Questions
How much did the naira gain last week?
The naira strengthened to ₦1,362.09 per dollar on Friday from ₦1,380.18 the previous Friday, representing a weekly gain of about 1.3 percent.
Why is the naira strengthening despite a stronger dollar?
Higher FX market liquidity, stronger external reserves and improving investor confidence have helped support the currency.
How much are Nigeria’s external reserves?
CBN data cited by BusinessDay showed reserves at about $52.02 billion as of July 23, 2026.