Naira Appreciates 4.13% in February as CBN Mops Up Dollars to Stall Gains
Nigeria's currency, the naira, appreciated by a significant 4.13 per cent in February 2026, defying deliberate efforts by the Central Bank of Nigeria to slow its momentum through late-month dollar purchases. A new report from the Financial Market Dealers Association reveals that the naira strengthened across both the official Nigerian Foreign Exchange Market and the parallel market, marking a notable shift from earlier periods of volatility.
CBN's Strategic Intervention to Manage Currency Appreciation
The apex bank reportedly stepped in toward the end of the month to mop up excess foreign exchange liquidity, a move aimed at preventing what policymakers considered an overly rapid appreciation of the currency. Market participants indicate that this intervention was strategic. A sharply rising naira could unsettle investors who purchased local fixed-income securities when the currency traded between N1,400 and N1,500 per dollar.
According to the dealers' association, the central bank's dollar purchases were intended to prevent distortions in investor positioning and protect returns tied to earlier exchange rate levels. Even with this intervention, the naira ended the month stronger across both segments of the market, underscoring renewed confidence in Nigeria's foreign exchange outlook.
Short-Term Pressures and Daily Trading Volatility
Despite February's overall rally, daily trading still reflects pockets of pressure. On Tuesday, the naira weakened by N6.27 at the official window, closing at N1,384.29 per dollar compared to N1,378.02 a day earlier. The parallel market also recorded a modest slip, with the currency easing to N1,380 per dollar from N1,375.
Analysts note that while temporary pullbacks are expected, the broader trend remains supported by external factors, particularly developments in the global oil market. Crude oil prices climbed toward $80 per barrel amid rising geopolitical tensions involving the United States and Iran. The escalation has raised concerns about potential disruptions along the Strait of Hormuz, a route that handles roughly a quarter of global seaborne oil trade.
Oil Prices and External Reserves Bolster Naira's Position
Market estimates suggest that a full disruption could push crude prices to between $120 and $150 per barrel. For Nigeria, higher oil prices typically translate into stronger export earnings and improved dollar inflows. However, analysts warn that a sustained oil spike could also fuel global energy costs, adding to inflationary pressures domestically.
Nigeria's foreign exchange buffers have improved significantly. Gross external reserves rose to $49.69 billion as of late February, reflecting stronger inflows and tighter liquidity management. CBN Governor Olayemi Cardoso recently disclosed that net external reserves surged 772.18 per cent over two years, reaching $34.80 billion at the end of 2025 from $3.99 billion in 2023. This increase signals firmer reserve backing for the currency and enhanced policy credibility.
A Delicate Balancing Act for Monetary Policy
The recent rally highlights a careful policy balance. On one hand, moderate appreciation boosts investor confidence and reinforces macroeconomic stability. On the other hand, excessive gains could disrupt carry trade positions and complicate fiscal benchmarks. For now, February's 4.13 per cent gain reflects a currency regaining resilience, supported by stronger reserves and oil-driven inflows.
Yet the central bank's steady hand suggests that while stability is welcome, unchecked momentum is not. The naira's performance in February demonstrates the complex interplay between market forces and regulatory interventions in Nigeria's foreign exchange landscape.
