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•Naira hits strongest level in 2 years
By Chinwendu Obienyi
Oil prices, capital inflows and other factors helped lift Nigeria’s external reserves by $66 million at the end of January, offering modest support to the country’s foreign exchange buffers as the naira rallied to its strongest level in nearly two years.
Data from the Central Bank of Nigeria (CBN) show that gross external reserves rose by 1.6 per cent month-on-month (m/m) to $46.11 billion at the end of January from $45.45 billion recorded in December 2025, reversing part of the pressure seen in previous months.
The increase was underpinned by a combination of firmer global crude oil prices, intermittent portfolio inflows, and proceeds from select sovereign and corporate external borrowing, according to market analysts.
Brent crude prices climbed during the month, supported by heightened geopolitical tensions in the Middle East, renewed supply-side risks, and OPEC+’s decision to pause planned production increases.
The benchmark crude averaged $69.8 per barrel in January, up 12.7 per cent from the previous month and marking its strongest level in several months. Higher oil prices tend to bolster Nigeria’s foreign exchange earnings, given that crude oil accounts for the bulk of export revenues.
In addition to oil-related inflows, analysts point to renewed foreign investor interest in domestic fixed-income assets following adjustments to Nigeria’s foreign exchange framework and tighter monetary conditions.
Elevated remittance inflows recorded in December may also have had residual effects on reserve accumulation, though the relative contribution of each factor remains difficult to quantify.
The improvement in external buffers coincided with a strong performance by the naira in January. At the official Nigerian Foreign Exchange Market (NFEM), the currency appreciated by 3.5 per cent m/m to close at N1,390.50/$1, its strongest level in almost two years. Gains were also recorded in the parallel market, where the naira strengthened by 1.3 per cent to N1,460/$1.
The rally reflects a combination of improved dollar liquidity, softening global dollar dynamics, and more active central bank intervention. Market reforms introduced over the past year, including greater transparency at the official FX window and efforts to clear outstanding FX backlogs, have helped restore confidence and reduce speculative demand in the market.
Tighter domestic liquidity conditions have further constrained speculative activity, supporting near-term currency stability. Analysts say the CBN’s ability to intervene has been enhanced by relatively comfortable reserve levels, even as broader structural challenges persist.
Despite the January improvement, Nigeria’s external reserves remain vulnerable to oil price volatility and shifts in global risk sentiment. Oil production constraints, security challenges in the Niger Delta, and uncertainty around sustained foreign inflows continue to pose downside risks to reserve accumulation.
Still, the combination of higher crude prices, selective capital inflows, and policy support has provided short-term relief for Africa’s largest economy.
Analysts at Cordros Research, said they expect the naira to remain broadly stable in the near term. “This projection is supported by a weaker dollar and a favourable external position characterized by a sustained current account surplus FX reserves.
In addition, continued investor confidence and elevated naira yields should sustain capital inflows, helping to anchor the exchange rate”, they said.
Echoing the same sentiment, Afrinvest Research, said ongoing market reforms and tighter liquidity conditions appear to have curtailed speculative activity in the secondary FX market, further anchoring near-term stability.
