The naira strengthened further in the official foreign exchange market on Wednesday, reaching N1,326.69 per dollar, its strongest level in two years, amid improved dollar liquidity and stronger external reserves.
The latest appreciation came as Nigeria’s foreign exchange market recorded increased activity, with market turnover rising to $14.68 billion in August, the highest monthly level in five months.
Data from the Financial Markets Dealers Association (FMDA) showed that the naira gained 1.5 percent against the dollar during the month, reflecting improved liquidity in the Nigerian Foreign Exchange Market (NFEM).
Nigeria’s external reserves also rose to $53.51 billion in August, the highest level since 2008, strengthening the country’s external position and providing additional support for the local currency.
Another major source of dollar liquidity has been formal remittance inflows. Nigeria received $947 million through International Money Transfer Operators (IMTOs) in July, the highest monthly inflow recorded through formal channels.
The July figure brought total IMTO inflows for the first seven months of 2026 to $3.8 billion, representing a 50.2 percent increase compared with the corresponding period in 2025.
The Central Bank of Nigeria (CBN) has attributed the improvement to reforms designed to make formal remittance channels more transparent and competitive, including changes to the IMTO regulatory framework, the introduction of the Non-Resident Bank Verification Number and stronger engagement with banks, IMTOs and Nigerians in the diaspora.
CBN Governor Olayemi Cardoso said the bank’s objective was to establish conditions that would allow formal remittance inflows to remain above $1 billion monthly.
“July is an important marker, but our focus is not on a single month. It is on creating the conditions for sustained growth in formal remittances,” Cardoso said.
Higher crude oil prices have also provided some support for Nigeria’s external position. Average Brent crude rose by 5 percent to $87.26 per barrel in August, although prices temporarily moved above $90 amid geopolitical tensions.
Meanwhile, domestic liquidity increased significantly during the month, rising 56.17 percent to N4.65 trillion from N2.98 trillion in July. The increase was attributed to maturing securities, Federation Account Allocation Committee (FAAC) distributions and other repayments, which outweighed the CBN’s liquidity-tightening operations.
Despite the naira’s gains in the official market, a widening gap with the parallel market remains a concern. While the naira appreciated 1.5 percent in the NFEM during August, its movement in the parallel market was only 0.06 percent.
Analysts have linked the divergence partly to potential pre-election demand for foreign currency, while the use of dollars in some real estate transactions continues to create structural demand for foreign exchange.
The combination of stronger reserves, increased market turnover, higher formal remittances and improved dollar liquidity has nevertheless created a more supportive environment for the naira.
The CBN’s challenge will now be to sustain the improvement in foreign exchange liquidity and currency stability without allowing excess domestic liquidity to generate fresh inflationary or monetary pressures.
Source: BusinessDay
