Naira hits five-month high as CBN discount window reforms boost FX turnover
By Aboki Forex —
The naira on Monday rose to a five-month high of N1,349.54 as interbank foreign exchange turnover surged by 265.86 percent. This followed the Central Bank of Nigeria's removal of restrictions that stopped banks from accessing its Standing Lending Facility after participating in FX transactions and primary auctions of government securities.
Data from the CBN showed the naira appreciated by N8.07, with the dollar quoted at N1,349.54 on Monday. That represents a 0.59 percent gain from the N1,357.61 quoted on Friday at the Nigerian Foreign Exchange Market. The last time the naira traded at a similar level was on April 22, 2026, when the dollar was quoted at N1,348.45.
Parallel market and turnover
In the parallel market, the naira strengthened to N1,410 on Monday, a 0.7 percent gain from N1,420 quoted last week. The gap between the official and parallel market rates stood at 4.48 percent on Monday, compared with 4.64 percent on Friday.
The number of deals in the interbank segment rose by 29.93 percent, from 137 on Friday to 178 on Monday. Total turnover surged by 265.86 percent to $437.53 million, the highest since July 22, 2026, compared with $119.59 million recorded on Friday.
NFEM figures for deals and turnover were not available at the time of reporting. However, activities moderated in the previous session, as total turnover declined by 8.98 percent to $352.34 million on Friday from $387.09 million on Thursday. The number of deals at the NFEM window rose by 11.31 percent, from 283 on Thursday to 315 on Friday.
Reserves and analyst view
Nigeria's external reserves, which give the CBN firepower to support the naira, rose to $52.25 billion as of August 13, 2026, their highest level in 17 years. That represents a 28.32 percent increase from the $40.72 billion recorded in the corresponding period of 2025.
Ayodeji Ebo, chief executive officer of MDU Capital, said the naira's appreciation may be partly linked to the revised discount window rules, as they give banks greater liquidity flexibility and support confidence in the FX market. He added that improved FX supply, stronger reserves and moderate demand also contributed to the gains.
“It will be encouraging to see similar appreciation in the parallel market. Although the spread has narrowed, it remains significant, and further convergence would reduce arbitrage and strengthen confidence in the sustainability of the naira’s gains,” he said.
CBN reforms and implications
Last Wednesday, the CBN issued a circular introducing reforms to improve financial market functioning. Measures include easing restrictions on Deposit Money Banks' access to the discount window and Standing Lending Facility, resuming tenored repo operations across four to 90 days, and broadening eligible participants in the OMO market to include non-bank financial institutions, corporates and retail investors.
The regulator, however, retained restrictions on banks' participation in OMO auctions on the same day they accessed the discount window.
According to analysts at Quest Merchant Bank Limited, the reforms should improve market liquidity, strengthen monetary policy transmission and deepen participation in the fixed-income market. “The reforms are likely to deepen activity across the money market and fixed-income markets while signalling growing confidence in FX market stability, reserve adequacy and overall market conditions,” they said.
The reforms could also affect yields and investment returns. Broader investor participation in OMO securities may accelerate yield compression over time, potentially reducing treasury income opportunities for banks and moderating the carry attractiveness of naira assets.