Naira Breaks New Ground, Gains 3.6% as Foreign Investors Move Dollars Into Nigeria

Nigeria’s naira has achieved significant gains, marking its strongest monthly performance in nearly two years as foreign investment in the economy increases. In January 2025, the local currency appreciated by approximately 3.6 percent against the U.S. dollar in the official foreign exchange market.

This rise has been attributed to an increase in offshore inflows and lower demand for international payments.

Market data indicates that the naira gained about ₦35 per dollar on a week-to-week basis, closing at ₦1,386.55 per dollar in the official market. During the week, it even hit an intraweek low of ₦1,381 per dollar, a benchmark not reached in months, signaling growing optimism about the sustainability of recent currency reforms designed to reduce arbitrage and speculative trading.

The positive trend was also evident in the parallel market, where the naira strengthened by ₦25, closing at ₦1,460 per dollar at the end of last week’s trading. However, despite these improvements, the gap between the official and parallel exchange rates widened slightly. TrustBanc Financial Group reported that the foreign exchange spread increased to 5.30 percent, up from 4.46 percent the week before.

Analysts say the widening spread reflects lingering structural frictions but does little to undermine the broader narrative of improving currency stability.

Foreign investors return as liquidity improves

Throughout January, stability largely prevailed in the FX market, with modest but steady appreciation driven by improved liquidity. Foreign portfolio investors, local market participants, and reduced Central Bank of Nigeria intervention collectively supported the naira’s rally.

Officially, the naira gained 3.55 per cent during the month, while the parallel market recorded a smaller but notable 0.68 per cent appreciation.

According to a report by Market Forces Africa, the improvement came amid a surge in Nigeria’s external reserves, which crossed the $46 billion mark, offering a stronger buffer for the economy.

External reserves cross the $46 billion mark

Nigeria’s gross external reserves rose by $687.4 million in just 30 days to $46.18 billion, underpinned by higher crude oil receipts, diaspora remittances, and improved non-oil FX inflows.

Analysts view the reserve buildup as a critical anchor for the currency, particularly at a time when global investors are closely watching Nigeria’s reform trajectory.

Market watchers say foreign portfolio investments have been flowing back into Nigerian assets as elevated yields on naira-denominated instruments remain attractive for offshore investors seeking higher returns.

Osas Igho, a financial analyst revealed on call with Legit.ng that Nigeria’s external reserves positions gives the naira a competitive edge.

“Right now, the naira has a strong edge over the US dollar due Nigeria’s strong reserves position. You know that the reserves is buffer and a firepower against the naira’s depreciation when the chips are down,” he said.