Nigeria’s currency, the naira, extended its rally against the US dollar last week, buoyed by robust foreign exchange inflows and renewed investor confidence.

The naira touched its strongest level in seven months, signalling fresh momentum in the Central Bank of Nigeria’s (CBN) reform-driven strategy to stabilise the forex market.

Naira breaches ₦1,500 barrier

At the official window, the naira appreciated 0.07% to close at ₦1,475.34 per dollar, compared to ₦1,486 a day earlier.

The local currency traded as high as ₦1,470 intraday, its strongest in months, while the weakest level recorded was ₦1,480 per dollar.

Analysts noted that the breach of the ₦1,500 psychological barrier has boosted bullish sentiment, with expectations that the naira could test new support levels in the coming weeks.

$981 million FX inflows boost market confidence

Fresh data from the CBN and market trackers revealed that foreign exchange inflows rose significantly to $981 million at the official window last week, up from $605 million the previous week.

Coronation Merchant Bank, in its weekly market note, confirmed that foreign portfolio investments (FPI) led the inflows with $318.10 million.

Exporters and non-bank corporates followed closely, while additional supply came from CBN interventions, foreign direct investments, and other sources.

Market watchers say the improved liquidity is easing pressure on the naira and helping close the gap with the parallel market, where the currency weakened slightly to ₦1,502 per dollar.

Oil prices provide additional support

According to Market Forces Africa, global oil market dynamics also played a role in supporting Nigeria’s FX position.

Brent crude closed last week at $70.13 per barrel, up 5.17% week-on-week—its biggest weekly gain since June—while Nigeria’s Bonny Light crude ended at $70.90 per barrel.

The rally was triggered by falling US crude inventories and geopolitical risks, including Ukrainian drone attacks on Russian energy infrastructure, which prompted Moscow to impose fuel export restrictions through the year-end.

Although the restrictions cover a relatively small volume of refined products, they underscored the vulnerability of Russia’s oil sector and pushed traders to price in further supply uncertainties.

Naira outlook remains bullish

With inflows rising and oil prices stabilising, analysts believe the naira could maintain its upward trajectory in the short term.

However, they caution that sustained reforms, consistent FX supply, and stronger non-oil exports will be critical to building resilience against external shocks.

“The inflow momentum shows confidence is returning, but Nigeria needs to deepen structural reforms to sustain this progress,” one Lagos-based economist said.

The year-to-date average for Brent crude remains at $69.79 per barrel, about 12.60% below the 2024 average.

This suggests that while Nigeria is benefiting from short-term oil gains, longer-term fiscal planning will require caution.

The naira's rally comes amid a surge in Nigeria's external reserves, which hit $42.22 billion in September on the back of improved crude oil earnings.