Naira rebounds as liquidity improves

The naira on Wednesday rebounded in the official foreign exchange (FX) market, supported by improved liquidity and rising external reserves.

Data published by the Central Bank of Nigeria (CBN) showed that the naira appreciated by 90 kobo, with the dollar quoted at N1,382.18 on Wednesday, compared to N1,383.08 on Tuesday at the Nigerian Foreign Exchange Market (NFEM).

The local currency, however, remained unchanged at N1,420 per dollar in the parallel market, also known as the black market. As a result, the gap between the official and parallel market rates narrowed slightly to N38 per dollar on Wednesday from N37 on Tuesday.

Although NFEM data for Wednesday’s deals and turnover were unavailable as of the time of reporting, market activity strengthened on July 14. The number of deals rose by 28.62 percent to 346 from 269 recorded on July 13, while total turnover increased by 11.78 percent to $613.58 million from $548.94 million.

In contrast, activity at the interbank FX segment weakened. The number of deals fell by 17.86 percent to 115 on Wednesday from 140 on Tuesday, while total turnover declined sharply by 49.92 percent to $121.73 million from $243.09 million over the same period.

Nigeria’s external reserves, which provide the CBN with the capacity to support the naira and meet external obligations, continued their upward trajectory, rising to a 17-year high of $51.87 billion as of July 14, 2026. This represents a 37.81 percent increase from $37.64 billion recorded during the corresponding period in 2025, according to data published on the CBN’s website.

Analysts at Quest Merchant Bank noted that gross external reserves rose by $1.9 billion to $51.5 billion in June 2026 and were up by $2.3 billion on a quarter-on-quarter basis. The increase marked the second consecutive month of reserve accretion after temporary drawdowns in March and April, which were largely driven by seasonal external debt servicing obligations.

According to the analysts, the sustained recovery in external reserves reflects a combination of resilient foreign portfolio inflows, stronger export earnings and improved investor confidence. They said Nigeria has continued to attract offshore investors seeking high yields as the CBN maintains a tight monetary policy stance, while improved market liquidity, stronger external buffers and a more stable foreign exchange environment have further strengthened confidence.

The bank also attributed the reserve build-up to higher crude oil prices and a steady improvement in Nigeria’s crude oil production, which have boosted export receipts.

Quest Merchant Bank noted that Nigeria’s reserves are sufficient to cover 14.4 months of merchandise imports based on the balance of payments for the 12 months to December 2025, and 9.9 months when imported services are included.

The analysts added that although the $5 billion total return swap arrangement with the United Arab Emirates initially raised concerns over its structure and sustainability, the reported $1.5 billion drawdown has also contributed to reserve growth.

According to the report, the sustained increase in external reserves has helped support the relative stability of the naira by providing a stronger buffer against external shocks and strengthening confidence in the foreign exchange market.

In comparison, South Africa’s international liquidity position, a broader measure of external reserves, declined for a second consecutive month, falling by $2.2 billion to $71.3 billion due to lower gold reserve valuations and external debt repayments.

Egypt, however, continued to strengthen its external position, with net external reserves increasing by about $2 billion to $55.1 billion, supported by robust external inflows and favourable valuation gains on reserve assets.

Looking ahead, Quest Merchant Bank expects Nigeria’s external reserves to continue rising, underpinned by stronger export earnings from higher crude oil production and sustained inflows from offshore investors attracted by the country’s elevated interest rates.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.