SAT SEPT 05 2026-theGBJournal| Nigeria’s foreign-exchange position is strengthening rapidly, with gross external reserves climbing above $54 billion as the naira records its strongest run in years.
However, a wide gap between the official and parallel-market exchange rates shows that dollar demand remains elevated outside the formal market.
The naira appreciated 1.3% week-on-week to N1,320.64/$, supported by stronger offshore dollar supply linked to participation in this week’s Open Market Operations (OMO) and Treasury bills (NTB) auctions.
The gains came as gross external reserves increased by $773.40 million to $54.08 billion as of September 3, 2026, giving the Central Bank of Nigeria (CBN) a significantly stronger external liquidity buffer and reinforcing market confidence in the country’s ability to meet foreign-exchange obligations.
Yet the improvement in the official market has not fully translated into the parallel market.
The dollar was quoted at about N1,400 to buy and N1,410 to sell in the parallel market on Friday, leaving a gap of roughly N80-N90/$ against the official rate.
The premium suggests that, despite improving liquidity conditions, demand for dollars outside the formal market remains strong.
The strengthening currency is putting the naira on track for its best annual performance in almost a decade, as rising dollar inflows from higher oil prices and remittances help insulate the currency from political risks normally associated with an election season.
Analysts expect the naira to end the year at N1,290/$, compared with its N1,328.92/$ close on Wednesday, according to the average forecast of four analysts surveyed by Bloomberg.
If that forecast is realised, the naira’s gain of about 8% so far this year would extend to almost 12% by year-end, marking its strongest annual advance since at least 2018.
The rally represents a sharp change in sentiment after years of pressure on the currency, when shortages of foreign exchange, declining reserves and weak dollar supply contributed to repeated bouts of naira depreciation.
This time, the underlying supply picture is improving.
Higher oil prices are generating stronger dollar earnings for Africa’s largest oil producer, while remittances are adding another important source of foreign currency.
Increased offshore participation in domestic securities auctions is also providing additional dollar liquidity to the market.
The latest reserves figure is particularly significant because it gives policymakers greater room to manage periods of heightened demand for foreign exchange.
Gross reserves have risen by $773.40 million to $54.08 billion, strengthening Nigeria’s external position at a time when the naira is showing signs of sustained appreciation.
The improvement also comes as the naira’s gains have begun to extend beyond the spot market.
Forward market points to sustained naira strength
In the forwards market, the naira appreciated across all major maturities, suggesting that the improved sentiment is not limited to immediate dollar supply.
The one-month forward strengthened 1.4% to N1,343.44/$, while the three-month contract appreciated 1.3% to N1,380.20/$.
The six-month forward also gained 1.3% to N1,432.54/$, while the one-year contract strengthened 1% to N1,541.29/$.
The movement across the curve indicates that investors are pricing in a relatively stronger naira over the coming months, supported by improved foreign-exchange liquidity and stronger external buffers.
But the parallel market remains the pressure point
Despite the improved official-market performance, the parallel-market rate remains an important indicator of underlying dollar demand.
At about N1,400-N1,410/$, the parallel-market rate is substantially weaker than the official N1,320.64/$ level.
The difference suggests that not all segments of the economy are accessing dollars at the official rate and that some demand continues to migrate towards alternative channels.
That gap will therefore remain a key test of whether the current improvement in the FX market represents a durable strengthening of the naira or simply a period of stronger liquidity.
A sustained narrowing of the spread would provide a stronger signal that foreign-exchange supply is catching up with demand across the broader market.
For now, however, the combination of rising reserves, stronger oil and remittance inflows, increased offshore participation and gains across the forward curve is giving the naira its most favourable backdrop in years.
The challenge for policymakers will be to convert that improved liquidity into a more unified FX market, where gains in the official market are increasingly reflected in the parallel market.
If current dollar inflows are sustained, the naira could close 2026 with its strongest annual gain in nearly a decade — while the $54 billion-plus reserve stockpile provides a substantially stronger foundation for the currency than it had at the start of the year.
X-@theGBJournal|email:gbj@govbusinessjournal.com|govandbusinessj@gmail.com
