Naira Extends Rally In 2026 First Trading Day

The naira extended its appreciation against the dollar at the official foreign exchange (FX) market on the first trading day of 2026, supported by continued intervention by the Central Bank of Nigeria (CBN) and improved FX inflows, even as renewed demand pressure emerged in the parallel market following the commencement of the new tax law.

Data published by the CBN showed that the naira strengthened by N4.91, representing a 0.34 percent gain, as the dollar was quoted at N1,430.84 on Friday compared with N1,435.75 on Wednesday, the final trading session of 2025, at the Nigerian Foreign Exchange Market (NFEM).

On a year-on-year basis, the local currency recorded a significant appreciation of N110.52, translating to a 7.7 percent gain from N1,541.36 traded at the official window at the beginning of 2025. The performance reflects sustained policy efforts by the apex bank to improve FX liquidity, rebuild confidence and narrow volatility in the FX market.

In contrast, the parallel market, also known as the black market, witnessed renewed depreciation as demand pressure resurfaced. Market participants attributed the pressure to individuals rushing to withdraw naira balances and convert to dollars following the commencement of the new tax regime, amid concerns about potential changes in transaction costs and compliance requirements.

Traders said the heightened demand pushed the naira to depreciate by N15, or 1 percent, to close at N1,500 on Friday, the first trading day of 2026, compared with N1,485 recorded on Wednesday, the last trading day of 2025.

Despite the short-term pressure, the naira remains stronger in the parallel market on a year-on-year basis. Compared with January 2025 levels, the currency appreciated by N160, or 10.67 percent, closing at N1,500 versus N1,660 traded at the beginning of January 2025, underscoring the broader gains recorded over the past year.

Meanwhile, total FX inflows declined sharply to about $74.8 million last week, representing a drop of roughly 95 percent week-on-week from the $1.46 billion recorded in the previous week, according to a report by the Coronation Merchant Bank Research Department. The sharp moderation followed exceptional inflows recorded earlier, largely driven by seasonal factors and one-off transactions.

Local sources dominated FX supply, accounting for about 70 percent or $52.0 million of total inflows. The CBN led domestic supply with $19.6 million, while exporters and importers contributed about $16.5 million. In contrast, international inflows remained subdued at $23.0 million, with foreign portfolio investors accounting for approximately $16.9 million, largely through investments in fixed-income instruments.

The naira had strengthened across markets ahead of the Christmas break, supported by sustained CBN intervention and improved FX liquidity. It closed at N1,443.38 per dollar at the NFEM, representing a 1.46 percent gain on a week-on-week basis. The parallel market rate also appreciated to N1,475 per dollar, up 1.36 percent week-on-week, pointing to improved FX stability and narrowing market distortions.

Nigeria’s external reserves, which provide the CBN with critical capacity to support the naira and manage FX volatility, rose to $45.50 billion as of December 31, 2025. This represents an 11.3 percent increase from $40.87 billion recorded in the corresponding period of December 31, 2024, according to data from the CBN. The steady rise in reserves continues to underpin confidence in the apex bank’s ability to sustain FX market stability in 2026.