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With the naira recording a 0.57 per cent appreciation in the month of July, there are concerns that the modest gain is set to be tested by a wave of seasonal foreign exchange demand from summer holiday travel to offshore tuition payments and end-of-quarter importer obligations.
According to traders and market experts, these cyclical outflows are expected to intensify pressure on the currency in the coming weeks, even as the Central Bank of Nigeria (CBN) maintains its supportive policy stance.
The naira recorded a modest appreciation in July 2026, closing the month at N1,368.22/$1 in the official foreign exchange market, up 0.57 per cent from the N1,376/$1 rate at the end of June.
Data from the CBN showed that the naira gave back some of its earlier monthly gains in the final week of July, depreciating 0.45 per cent week-on-week (w/w) to settle at N1,368.22/$1 from N1,362.09/$1 in the previous session.
The pullback highlights the delicate balance between improving FX liquidity and persistent structural demand pressures in Africa’s largest economy.
In the parallel market, the naira also faced headwinds, trading as high as N1,410/$1 before closing the week at N1,405/$1, broadly unchanged from the prior week and within the N1,400–N1,420 band observed through much of July. The relatively stable closing rate suggests that while demand pressures persisted, they were largely absorbed by available market liquidity, preventing a sustained depreciation.
Nigeria’s gross external reserves edged lower by 0.21 per cent w/w to $51.92 billion in the last week of July, from $52.03 billion in the previous week, reflecting the apex bank’s continued supply of dollars to the market to absorb seasonal demand and smooth exchange rate volatility.
Despite the weekly decline, reserves remained at a healthy level, covering about 11 months of imports and providing a significant buffer against external shocks. This reserve position has been a key factor underpinning investor confidence and supporting the naira’s performance so far this year.
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Pointing to several seasonal factors driving FX demand in July, a Lagos based FX trader, Abdullahi Aliyu, said that the market saw a combination of technical and seasonal demand owing to the improved dollar liquidity and improved oil production.
“The CBN has been active in supplying dollars in to the market. Also, there has been improved crude oil production and supportive international oil prices which have boosted FX inflows from oil exports
The question is whether inflows from oil exports and portfolio investments can keep pace with this seasonal surge that is expected in the new month especially the ember months too”, Aliyu said.
The CBN’s sustained interventions have been crucial in stabilising the exchange rate. The apex bank has maintained a hawkish monetary policy stance, with the benchmark interest rate at 26.5 per cent, making naira-denominated assets attractive to foreign investors. Treasury bill yields remain in the 16–19 per cent range, supporting continued foreign portfolio inflows into Nigerian fixed-income securities.
Improved crude oil production and supportive international oil prices have also boosted FX inflows from oil exports, feeding into both reserves and market liquidity. Nigeria’s external reserves have increased from about $45.5 billion in 2025 to over $52 billion in mid-2026, giving the CBN more firepower to defend the currency.
Analysts expect the naira to remain broadly stable in the near term, underpinned by the CBN’s sustained interventions and Nigeria’s healthy external reserve position. However, they caution that the scope for meaningful appreciation remains limited unless FX inflows strengthen further.
Cowry Research said, “We expect the Naira to remain broadly stable in the near term, supported by the CBN’s sustained interventions and Nigeria’s healthy external reserve position, which should help contain exchange rate volatility.
However, seasonal foreign exchange demandassociated with summer travel, offshore tuition payments, and importer obligations is likely to keep pressure on the market. As such, while we do not anticipate a sharp depreciation under the current policy stance, the scope for meaningful appreciation remains limited unless foreign exchange inflows strengthen further”.
