The naira recorded a notable appreciation of approximately 3.6% against the U.S. dollar in January 2025, supported by increased foreign exchange inflows and subdued demand for international payments.
Week-on-week, the local currency gained ₦35 against the dollar, closing at ₦1,386.55/$ in the official foreign exchange market. The naira traded at an intraweek low of ₦1,381, reflecting improved sentiment as recent reforms reduced arbitrage opportunities and speculative activity.
In the parallel market, the currency also strengthened, appreciating by ₦25 to close at ₦1,460/$ at the end of the week. TrustBanc Financial Group noted that the spread between the official and parallel market rates widened to 5.30%, compared to 4.46% the previous week.
Currency stability dominated trading throughout January, with modest appreciation driven by improved FX liquidity from foreign portfolio investors (FPIs), domestic market participants, and limited intervention by the Central Bank of Nigeria.
Overall, the naira gained 3.55% in the official market and 0.68% in the parallel segment during the month, coinciding with a steady rise in Nigeria’s external reserves. Gross reserves surpassed $46 billion in January, bolstered by higher crude oil earnings and other foreign inflows.
Data showed that external reserves increased by $687.40 million over a 30-day period to reach $46.18 billion, supported by stronger FX inflows from oil receipts, remittances, and ongoing stabilization policies.
Market analysts observed that foreign portfolio investments have increasingly flowed into Nigeria’s financial markets, attracted by relatively high yields on naira-denominated assets.
Looking ahead, expectations for the currency remain positive in February, underpinned by the sharp increase in external reserves recorded in January despite lower FX interventions.
Cowry Asset Limited projected that the naira would maintain moderate gains, supported by steady crude oil receipts, improving non-oil inflows, and a favorable trade balance. The firm also expects oil prices to remain stable to mildly bullish, reflecting consistent global demand and the U.S. Federal Reserve’s decision to keep interest rates unchanged.
Similarly, analysts at AIICO Capital Limited anticipate continued volatility but expect the naira to remain broadly stable with modest appreciation in February.
According to AIICO Capital, strong external reserves and expectations of sustained high crude oil prices should continue to provide support, alongside ongoing monetary and fiscal reforms aimed at attracting foreign inflows. The firm added that downside risks from external shocks are likely to remain limited in the near term.
