Naira Weakens Against Dollar as Foreign Exchange Turnover Soars by Over 260%
The Nigerian naira experienced depreciation against the United States dollar on Thursday, January 23, 2026, even as new data reveals an extraordinary surge in foreign exchange market activity during the first half of 2025. According to the Central Bank of Nigeria's latest Financial Stability Report, total FX turnover climbed dramatically to $52.47 billion between January and June 2025, representing a staggering 262.4% increase from the $14.48 billion recorded in the preceding half-year period.
CBN's Electronic System Drives Unprecedented Market Liquidity
The Central Bank of Nigeria attributes this remarkable growth in foreign exchange activity primarily to the successful implementation of its Electronic Foreign Exchange Matching System (EFEMS). This technological platform has significantly enhanced market efficiency and transparency, facilitating greater participation among authorized dealers. The increased liquidity resulting from this system initially provided substantial support to the naira, contributing to its overall strengthening across both official and parallel market segments throughout much of the reporting period.
Detailed breakdowns show that foreign exchange sales rose sharply to $4.74 billion during H1 2025, up from $3.18 billion in the second half of 2024. Meanwhile, purchases stood at $3.97 billion, resulting in net sales of $0.77 billion. Notably, the CBN reported that no new forward transactions were recorded during the review period, and while there were no new over-the-counter FX futures contracts, matured contracts increased to $86.49 million from $78.70 million at the end of December 2024.
Recent Exchange Rate Movements and Market Developments
Despite the overall positive trend in market liquidity, the naira experienced slight depreciation at the Nigerian Foreign Exchange Market (NFEM) on Thursday. Official CBN data indicates the currency weakened by N1.38 to N1,422.07 per dollar, down from N1,420.69 on Wednesday. In contrast, the parallel market saw marginal strengthening, with the naira appreciating to N1,487 per dollar from N1,490, where it had remained relatively stable for approximately two weeks.
Several additional factors are contributing to Nigeria's evolving foreign exchange landscape:
- External Reserves Growth: Nigeria's external reserves continued their upward trajectory, reaching $45.98 billion as of January 21, 2026, providing fundamental support for currency stability.
- Regulatory Oversight: The CBN conducted comprehensive foreign exchange examinations of 34 authorized dealers, including 29 commercial banks and five merchant banks, to ensure regulatory compliance and verify sources of FX inflows.
- Bilateral Agreement: The Bilateral Currency Swap Agreement between the CBN and the People's Bank of China, valued at N720 billion (CNY15 billion) and renewed in April 2024, remained active with no new transactions recorded, keeping cumulative sales at CNY9.22 billion.
Improved Market Confidence and Currency Performance
The Central Bank has emphasized that the naira's improved performance throughout 2025 resulted from multiple converging factors. Stronger foreign exchange liquidity, combined with the widespread adoption of the Nigerian FX Code, has enhanced market-based price discovery mechanisms while promoting greater transparency and ethical conduct among market participants. These developments have collectively bolstered investor confidence in Nigeria's foreign exchange ecosystem.
This renewed confidence is reflected in the naira's exit from Africa's ten worst-performing currencies in October 2025, ending a nearly two-year presence on that unfavorable list. According to data from the Forbes currency calculator, the Nigerian currency remained outside the bottom-ten ranking through December 2025, supported by stronger external reserves, strategic policy adjustments, and improved foreign exchange liquidity. Overall, the naira is estimated to have closed the year positioned between Africa's 15th and 20th weakest currencies, marking significant improvement from previous rankings.
The substantial increase in foreign exchange turnover, driven by technological innovation through the EFEMS platform, represents a transformative development for Nigeria's financial markets. While short-term fluctuations continue to occur, the underlying strengthening of market infrastructure and regulatory frameworks suggests a more stable foundation for the naira's long-term performance against major global currencies like the US dollar.
