NIGERIA’s currency strengthened further on Wednesday, continuing a rally that has seen the naira reach its highest official level in nearly two years. At the Nigerian Foreign Exchange Market (NFEM), the naira closed at N1,358.28 to the US dollar, reflecting renewed confidence in the foreign exchange (FX) system as external reserves rise and oil prices rise amid the United States dollar weakness.
Data from the Central Bank of Nigeria (CBN) showed that the local currency appreciated by N14.63 from its previous close of N1,372.91, representing a 1.1 percent gain in a single session. Market participants say the consistent improvement is being driven by a combination of stronger dollar inflows, higher oil prices, reduced speculative activity, and policy reforms that have increased transparency and confidence in price discovery.
The strengthening at the official window has been accompanied by calm conditions in the parallel market. Street traders across major commercial hubs quoted the naira at around N1,440 per dollar, unchanged from previous sessions. The stability in the informal segment suggests that pressure from unmet FX demand is easing, as more businesses and individuals gain access to dollars through formal channels.
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One of the key pillars supporting the naira’s recent performance is the steady growth in Nigeria’s external reserves. According to CBN figures, gross reserves climbed to $46.70 billion as of February 3, 2026. The build-up of reserves has improved the country’s ability to defend the currency, meet foreign obligations, and reassure investors about Nigeria’s external position.
Oil prices
Similarly, oil prices rose on Wednesday after the U.S. shot down an Iranian drone and armed Iranian boats approached a U.S.-flagged vessel, rekindling fears of an escalation between Washington and Tehran ahead of planned talks, CNBC reported.
Brent crude oil futures were up 18 cents, or 0.27 percent, at $67.51 a barrel by 8:05 a.m. ET. U.S. West Texas Intermediate crude was up 22 cents, or 0.35 percent, at $63.43. Both benchmarks have changed rapidly this week between news of talks to de-escalate tensions between the United States and Iran and heightened fears of potential disruption to oil flows through the Strait of Hormuz.
Dollar weakens
More so, the U.S. dollar traded mixed to slightly weaker in forex markets on Wednesday , with some currency pairs showing weakness versus major peers (e.g., Canadian dollar gains relative to USD) as markets reacted to commodity and economic news.
The U.S. Dollar Index dropped to 96 last week, down almost 11 percent over the past year, as President Donald Trump told reporters that he was ‘not concerned’ about the currency’s decline. A weaker dollar means pricier imports, higher fuel costs, and potentially steeper interest rates on mortgage, car loan, and credit cards, Investopedia says.
Analysts’ perspective
Market analysts have also highlighted structural changes that are supporting the naira’s recovery. According to Rhodium Capital Limited, the currency extended its gains in the latest NFEM session, closing at N1,358.28 per dollar on the back of steady reserve accumulation and better FX supply. The firm said the improved flow of dollars into the system has helped ease backlogs and reduce pressure on the exchange rate.
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Rhodium Capital further explained that short-term weakness in the US dollar globally had also supported emerging market currencies, including the naira. At the same time, enhanced transparency in Nigeria’s FX supply framework has boosted confidence and reduced uncertainty for businesses and investors.
The firm added that the appreciation recorded in the parallel market has narrowed the gap between official and unofficial rates. This convergence, they said, was a strong signal that FX availability is improving and that the market was moving toward a more balanced supply-demand dynamic.
Looking ahead, Rhodium Capital expects the naira to maintain its upward momentum in the near term. The firm said rising reserves, lower speculative activity, and ongoing improvements in market structure should continue to provide support for the local currency. While external risks remain, analysts believe Nigeria’s stronger buffers and reforms have placed the FX market on a more stable footing than in previous years.
