Forex utilisation jumps 74pc to $16.2bn as naira confidence strengthens

Nigeria's foreign exchange utilisation surged by 74 percent year-on-year to $16.2 billion in the first quarter of 2026, driven by a more stable naira and renewed confidence in the official market. Data from the Central Bank of Nigeria's Quarterly Statistical Bulletin shows invisible transactions more than doubled to $11.4 billion from $4.5 billion a year earlier.

Financial services lead invisible transactions

Invisible transactions accounted for about 70 percent of total FX utilisation during the period. Financial services was the dominant user, with utilisation rising by 117 percent year-on-year to $9 billion, representing about 79 percent of total invisible transactions.

Business services also recorded a sharp increase, rising to $1.2 billion from $223.6 million. In contrast, merchandise imports stayed relatively stable at $4.9 billion, a marginal 0.2 percent rise from the previous year.

Industrial firms cut FX utilisation by 20 percent year-on-year to $1.8 billion, despite heavy dependence on imported raw materials, machinery and equipment. Utilisation for manufactured products jumped to $1.1 billion from $477.9 million, while transport products rose to $295 million from $142.8 million. Analysts attributed part of these increases to higher import costs from global supply-chain disruptions and elevated prices of critical inputs.

Naira gains, reserves rise

The broad increase in FX utilisation came as the naira strengthened to around N1,339 per dollar in the official market, compared with about N1,431/$ at the start of the year. At N1,338.59/$, the currency has appreciated by roughly 6.5 percent since the first trading day of 2026.

This means N1 million, which was equivalent to about $699 at the January rate, is now worth roughly $747 at the prevailing official rate. The stronger exchange rate has implications for businesses importing machinery, software and dollar-priced inputs, as well as Nigerians paying foreign education and travel expenses and companies servicing FX-linked obligations.

Turnover on the Nigerian Foreign Exchange Market reached about $914 million on Wednesday, indicating stronger participation and liquidity. The gap between official and parallel-market rates has narrowed to about 4.4 percent, reducing arbitrage incentives and improving price discovery credibility.

Nigeria's gross external reserves have risen to about $53.29 billion, an increase of roughly 29 percent from a year earlier, providing additional support for currency confidence.

Outlook and structural gains

Quest Merchant Bank analysts said they expected FX utilisation across sectors to strengthen further, supported by ongoing CBN reforms aimed at sustaining foreign exchange supply, deepening market liquidity and preserving confidence in the naira.

The gains come as Nigeria seeks to strengthen its position with international investors following its return to the FTSE Russell Frontier Market classification. For foreign investors, the ability to convert naira and repatriate proceeds is a critical consideration, and the improved liquidity and narrower rate gap point to gradual rebuilding of trust in the FX market.

Analysts cautioned that a stronger naira does not automatically translate into lower domestic living costs, as food, rent, electricity, transportation and other prices remain influenced by energy costs, wages, logistics, taxes, supply constraints and accumulated inflation. They added that sustainability depends on continued dollar supply, stronger external buffers and consistency of CBN reforms. The longer-term objective, they noted, is not simply a particular exchange rate but a liquid, predictable and transparent FX market businesses and investors can rely on.