In a remarkable turnaround for Nigeria's economy, the naira has recorded its most robust annual performance in more than ten years. Data from the Central Bank of Nigeria reveals the currency appreciated by a significant 7.4% against the US dollar throughout 2025, closing the year at N1,435.75 per dollar. This marks a dramatic shift from the persistent volatility and depreciation that had characterised the foreign exchange market for years.
Sustained Momentum into the New Year
The positive trend has not slowed down. As the country entered 2026, the naira continued its upward climb. On Tuesday, January 6, 2026, it reached an all-time high of N1,419.06 per dollar at the Nigerian Foreign Exchange Market. This milestone coincided with the first anniversary of the pivotal Electronic Foreign Exchange Management System (EFEMS). Analysts note that the steady gains have fostered a new perception of stability and transparency within the FX ecosystem.
Further reinforcing this stability is the narrowing gap with the parallel market. The naira traded flat at N1,490 per dollar in the so-called black market, indicating a substantial reduction in speculative pressure compared to previous periods of wide disparity.
CBN's Reforming Hand and Fortified Reserves
The driving force behind this recovery is widely attributed to a series of sweeping reforms implemented by the Central Bank of Nigeria under Governor Olayemi Cardoso. Upon taking office, the CBN leadership inherited a paralysed FX market burdened by a backlog exceeding $7 billion in unmet obligations. The gap between official and parallel rates was more than 60%, creating severe market distortions.
Governor Cardoso has described the current turnaround as a clear signal of renewed economic confidence. Key to this has been the unification of multiple exchange-rate windows and the complete clearance of the historic FX backlog. Additionally, the introduction of the Nigerian Foreign Exchange Code and the EFEMS platform has enhanced transparency, governance, and price discovery, slashing the premium between official and parallel rates to under 2%.
Bolstering the CBN's capacity to defend the currency is a notable strengthening of Nigeria's external reserves, which climbed to $45.60 billion as of January 5, 2026. This reserve build-up, stemming from improved foreign inflows and moderated demand, provides critical firepower to smoothen volatility and has been instrumental in restoring investor and importer confidence.
Economic Outlook Brightens with Stability
The apex bank projects that ongoing reforms will sustain exchange-rate stability, with external reserves expected to rise further to approximately $51.04 billion in 2026. This optimistic outlook is supported by several factors: reduced FX pressures, higher earnings from oil, potential sovereign bond issuances, and increased diaspora remittances. The operational expansion of the Dangote Refinery is also highlighted as a key future factor that could reduce import dependence and support reserve accumulation.
Economic experts have welcomed the newfound stability. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, identified exchange-rate stability as one of the most visible economic achievements of 2025. He noted that the naira largely traded within a predictable band of N1,440 to N1,500 throughout the year, easing imported inflation and restoring much-needed predictability for business planning, contracts, and investment decisions.
The CBN's active role in the market was underscored by its substantial interventions, having injected approximately $7.53 billion in 2025 to support the naira. This decisive action helped the currency outperform many analyst forecasts, with the year-end rate of N1,435.75 proving stronger than projections that had ranged around N1,450 to N1,500.
