Nigeria’s foreign exchange outlook is improving as Central Bank of Nigeria (CBN) reforms align with higher global oil prices to support the naira, rebuild external reserves, and restore market confidence.
Brent crude is trading above the Federal Government’s 2026 budget benchmark of $64.85 per barrel, hovering around $69, strengthening revenue expectations and easing pressure on external buffers.
Oil prices have risen for three straight sessions amid geopolitical tensions in the Middle East, particularly concerns around Iran. Brent futures climbed to about $69.34 per barrel, while US West Texas Intermediate rose to $64.13, driven largely by fears of supply disruptions through the Strait of Hormuz, which handles about 20 per cent of global oil shipments.
Analysts warn that a severe escalation could push prices significantly higher, with extreme scenarios projecting Brent above $90 per barrel. Supply disruptions in Kazakhstan and weather-related outages in the US have also tightened short-term supply.
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For Nigeria, stronger oil prices remain critical, with crude exports accounting for over 80 per cent of foreign exchange earnings. Analysts caution, however, that oil alone cannot deliver lasting FX stability without sustained policy discipline.
This time, higher oil prices are reinforcing sweeping FX reforms by the CBN that have reshaped pricing, supply, and supervision in the FX market.
Naira strengthens below N1,400/$
The naira ended January 2026 stronger in the official market, appreciating from N1,422.07/$ on January 23 to N1,386.55/$ by month-end, a 2.47 per cent gain.
Analysts view the move below N1,400/$ as a key psychological milestone, signalling improved liquidity and confidence in the restructured FX framework.
Cowry Assets Management Limited expects moderate gains, supported by steady oil receipts, stronger non-oil inflows, and a trade surplus, alongside stable global oil demand and unchanged US Federal Reserve rates. The gradual nature of the appreciation suggests improved price discovery and FX supply rather than administrative intervention.
The parallel market has followed suit, with the naira strengthening to about N1,454/$, narrowing the gap between official and informal rates.
AIICO Capital projects near-term volatility but broad stability, supported by robust reserves and ongoing reforms.
External reserves climb past $46bn
Nigeria’s external reserves stood at about $46.11bn as of January 28, 2026, up roughly $5.8bn from late 2024 and the highest level in nearly eight years.
Reserves rose by about $510m in the first 22 days of 2026 alone, reflecting stronger inflows and renewed confidence following FX liberalisation.
CBN Governor Olayemi Cardoso said the reserve build-up is organic, driven by improved market functioning, stronger non-oil exports, and rising capital inflows.
Foreign capital inflows reached $20.98bn in the first 10 months of 2025, up 70 per cent year-on-year, while diaspora remittances rose by about 12 per cent. The planned rollout of the Non-Resident BVN is expected to further boost inflows in 2026.
Policy coordination strengthens fundamentals
Economists say Nigeria’s improving FX outlook reflects deeper structural reforms, including reduced arbitrage, the removal of petrol subsidies—eliminating an estimated annual fiscal drain of over $10bn—and tighter coordination between monetary and fiscal authorities.
Bank recapitalisation, fiscal consolidation, tax reforms, and the permanent discontinuation of central bank deficit financing are strengthening macroeconomic discipline.
Analysts say the sustainability of recent FX gains will depend on maintaining these reforms amid evolving political and external pressures.
