The Nigerian Naira has continued its positive trajectory against major global currencies, marking a second consecutive day of appreciation in the official foreign exchange market. This strengthening occurred on Tuesday, December 23, 2025, even as the country witnessed a significant drop in foreign currency inflows.
Official and Parallel Market Performance
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the local currency gained N6.57 against the US dollar. The exchange rate closed at N1,449.99 per dollar, a 0.45% improvement from the previous day's rate of N1,456.56.
The Naira also showed strength against other major currencies. It appreciated by N1.30 against the British Pound to settle at N1,956.03/£1. Against the Euro, it rose by N2.94 to N1,707.65/€1.
In the commercial banking sector, the currency firmed up by N5 to trade at N1,465/$1. However, trading activity in the parallel market remained unchanged, with the rate holding steady at N1,485/$1.
Drivers of the Naira's Strength
Financial market operators have identified key factors behind the Naira's resilience. The gains are primarily attributed to increased foreign exchange supply in the official window. This boost is supported by sustained strategic interventions from the Central Bank of Nigeria (CBN) and the ongoing impact of recent economic reforms enacted by the government.
Furthermore, improved liquidity from exporters and foreign portfolio investors has helped ease the pressure on the local currency. This combination of factors has contributed to more stable trading conditions, even during the typically volatile holiday season. Analysts note that the recent gains have helped narrow the gap between the official and parallel market rates, a development that boosts investor confidence and allows for more orderly price discovery in the forex market.
Contrasting Data on Forex Inflows and Reserves
Despite the Naira's positive performance, underlying data reveals a complex picture. Reports indicate that foreign exchange inflows into the NAFEM window fell sharply by 49.3% to $741 million. This is a significant drop from the $1.46 billion recorded the previous week.
A breakdown of the inflows shows the Central Bank of Nigeria was the dominant source, accounting for 27.73% of the total supply. Exporters contributed 24.52%, while foreign portfolio investors brought in 24.23%. Other contributors included non-bank corporates (13.78%), individuals (7.37%), and other sources (2.37%).
Data on the nation's external reserves showed a marginal movement. The CBN's gross external reserves experienced a slight dip of 0.58% ($263.15 million) to $45.21 billion as of December 19. However, they rebounded slightly to $45.23 billion by December 22.
Divergent Expert Forecasts for the Naira in 2026
Looking ahead, financial analysts have presented varying projections for the Naira's performance in the coming year, 2026.
Analysts at SBM Intelligence expect the currency to trade within a relatively narrow and stable band. Their forecast suggests the Naira will oscillate between N1,470 and N1,520 per US dollar throughout 2026.
This view is partially echoed by Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. He stated that the currency's outlook hinges on both domestic and external factors. Yusuf projected that, "assuming current conditions hold and reserves remain stable, the Naira could trade between N1,400 and N1,500 per dollar."
In contrast, a more cautious prediction comes from David Cowan, Citibank’s African economist. In a note to clients, Cowan projected that the Naira could face renewed pressure, potentially weakening to a range between N1,650 and N1,700 by mid-2026. He linked this outlook to the Central Bank's anticipated shift towards a monetary easing cycle and a possible decline in global crude oil prices, a major source of Nigeria's foreign exchange earnings.
The sustained appreciation of the Naira, driven by CBN policies and improved market liquidity, provides a moment of stability for the Nigerian economy. However, the divergent forecasts from leading analysts highlight the ongoing uncertainties and the critical role of oil prices and monetary policy in determining the currency's long-term trajectory.
