Nigeria’s currency, the naira, has been under considerable pressure for years—marked by sharp depreciations, high inflation, and recurring foreign-exchange (FX) interventions. But now, the Central Bank of Nigeria (CBN) says recent developments are pointing to genuine improvement. The key drivers? Strong FX inflows, tighter controls, and a shift back toward more orthodox monetary policy.
This blog post dissects the latest statement by the CBN, explores how the FX landscape is changing in Nigeria, uncovers what it means for businesses and individuals, and outlines where the risks still lie.
What the CBN Is Saying: Key Highlights
Here are the main take-aways from the CBN’s recent remarks via its Director of Monetary Policy, Victor Eboh:
- FX inflows have improved — The CBN credits rising foreign‐exchange inflows as one of the stabilising forces for the naira.
- Tighter market controls & transparency — The central bank emphasises that access to foreign currency is now more unified: “Whether you are a big man or not, we all go to the same market now for dollars.”
- Reserves and import cover — According to the CBN, external reserves are above US$43 billion, giving roughly nine months of import cover for Nigeria—higher than many regional peers.
- Rate improvement, but stability prioritised — The naira, which at one point reached around ₦1,800/US$1 in the official window, is now reported at about ₦1,440/US$1. The CBN stresses that stability and sustainability matter more than an artificially strong rate.
- Return to orthodox policy — The CBN is signaling a move away from reallocative or favour-access FX policies, and toward more conventional monetary policy tools (interest rates, liquidity management, transparency).
Why This Matters: Impacts on the Economy
A. For the FX Market
- Improved confidence: With more transparent access to FX and stronger reserve buffers, businesses and foreign investors may feel more comfortable dealing in Naira/r – US$ transactions.
- Reduced speculative pressure: Stronger inflows and better controls reduce the scope for extreme FX volatility, meaning fewer surprises for importers and exporters.
B. For Importers and Exporters
- Importers: A more stable Naira means budgeting and cost-planning for imported goods becomes less uncertain.
- Exporters/remitters: If FX access is more transparent and inclusive, exporters and those receiving remittances may benefit from improved convertibility and lesser distortions.
C. For Monetary Policy and Inflation
- By prioritising exchange rate stability over aggressive depreciation, the CBN is also signalling a tighter link between FX management and inflation control. A stable exchange rate helps contain imported inflation (higher cost of imports).
- The shift toward orthodox policy also implies possibly higher interest rates or constrained liquidity in the near term, which may slow down some economic activities, but might improve macro-stability.
What’s Behind the Improvement: Three Key Drivers
- Stronger FX Inflows
- The rise in external reserves, partly due to improved oil/gas receipts, rising non-oil exports, and remittances. For example, one scan of data showed reserves climbing to ~US$41 billion in mid-2025.
- These inflows help bolster the supply side of the FX market, relieving pressure on the naira.
- Tighter Controls and Access Reform
- The CBN asserts that preferential or hidden access to FX for “big men” is gone — now all market participants are subject to the same rules.
- Implementation of things like the “Nigerian Foreign Exchange (FX) Code” earlier in the year aimed at boosting transparency and ethics in FX dealings.
- Policy Reform and Orthodoxy
- The move away from ad-hoc, sector-specific FX allocations to more market‐based mechanisms.
- Monetary policy is being recalibrated: while inflation remains elevated, the CBN appears more confident in its ability to support stability.
The Bigger Picture: Where Nigeria Stands
- While nine months of import cover is a strong buffer compared to many regional peers, sustaining that level depends heavily on oil/export performance and non-oil sector growth.
- The exchange rate improvement is official window; parallel or informal markets may still exhibit differing dynamics.
- Inflation remains a key vulnerability. A stable exchange rate doesn’t automatically translate into low inflation—especially if domestic supply shocks, high food prices or energy costs persist.
What to Watch: Risks & Headwinds
- Commodity price shocks: Nigeria is still exposed to oil/GDP volatility; a drop in oil price or output could undermine FX inflows.
- Non-oil export growth: The sustainability of FX inflows will depend on expanding non-oil sectors (agriculture, manufacturing, services) not just oil.
- Global investor sentiment: If global risk appetite drops or interest rate dynamics shift (for instance in the US), capital flows may be more volatile.
- Inflation & domestic disruptions: Even with FX stability, high inflation (especially food/inflation‐expectation driven) could erode real incomes and reduce confidence.
- Implementation risk: The reforms (equal access, transparency, policy discipline) need effective implementation; deviations or leakages could undermine progress.
What It Means For You: Practical Take-aways
- If you import goods into Nigeria: You may find more predictable FX rates and lesser surprises in budgeting. But still maintain a buffer for volatility.
- If you export or receive remittances: The clearer access and stronger inflows are positive signals. Still, understand which FX window you’re dealing with (official vs informal).
- If you’re investing or doing business in Nigeria: The improved FX and reserve position increase macro-stability, which is good. However, expect tighter borrowing conditions and that policy will focus on stability, which may restrict rapid credit growth.
- If you’re a consumer: A stronger/ stable Naira helps reduce the cost of imported goods and may relieve some inflation pressure via cheaper imported inputs; though domestic inflation will also depend on many other factors.
