The Nigerian Naira has received a substantial and welcome boost, fueled by a dramatic increase in US dollar inflows into the country's foreign exchange market. Fresh data reveals a surge in liquidity, providing much-needed support for the local currency and raising optimism among financial experts.
Sharp Rise in Dollar Supply Bolsters Market
According to the latest figures, foreign exchange inflows into the Nigerian market skyrocketed by 64.24% week-on-week, reaching a total of $841.10 million. This marks a significant improvement from the $512.20 million recorded the previous week, as confirmed by reports from Coronation Merchant Bank. The increased dollar supply has directly enhanced market liquidity, enabling more robust interventions from the Central Bank of Nigeria (CBN).
The CBN itself was the single largest contributor to this influx, accounting for 33.42% of the total, or $281.10 million. Other major sources included non-bank corporates (23.07%), Foreign Portfolio Investors (19.38%), and individuals (5.45%). This diversified inflow is seen as a positive signal of returning confidence from various segments of the market.
Naira Performance and Expert Outlook
The immediate effect of this liquidity injection was felt in the official Nigerian Foreign Exchange Market (NFEM), where the Naira appreciated by 0.69% over the week. The currency closed at N1,446.74 per US dollar, compared to N1,456.72 the week before. This positive movement in December follows a period of notable volatility, suggesting a potential stabilization.
However, the parallel market told a slightly different story, weakening by 0.34% to N1,470/$. This development widened the gap between the official and unofficial rates to N23.26 from N8.28 previously. Despite this divergence, analysts remain cautiously optimistic. Many expect the exchange rate to stabilize around the N1,500/$ mark, supported by the improved liquidity and anticipated continued CBN support.
Financial experts are upbeat about the Naira's prospects for the remainder of 2025. They point to the combination of robust inflows and a strengthening external reserve, which climbed to $44.6 billion, as a critical cushion against both domestic and external economic shocks. The renewed appetite from investors is viewed as a key catalyst for the market's recovery.
Cautious Optimism Amid Underlying Concerns
While the influx data is encouraging, some analysts advise a measured perspective. They highlight that certain investors are still adopting a wait-and-see approach due to ongoing challenges. Key concerns include escalating insecurity in parts of the country and a perceived lack of clear economic direction from the government regarding the 2026 fiscal year. These factors continue to inject an element of caution into the market's medium-term outlook.
In a related development supporting Nigeria's fiscal position, global crude oil prices saw a modest recovery. Brent crude rose 1.02% to $63.20 per barrel, while Nigeria's Bonny Light gained 3.13% to $66.29 per barrel. Although both grades remain down for the year, the uptick provides a slightly more favorable backdrop for the nation's primary source of dollar earnings.
The significant rise in dollar inflows represents a crucial vote of confidence in Nigeria's foreign exchange reforms. It underscores the pivotal role of the Central Bank in managing liquidity and sets a hopeful tone for the Naira's stability as the year draws to a close.
