Naira appreciates 1.46% in August as FX inflows hit $5.2bn

The naira appreciated by 1.46 per cent month-on-month in August, with the average exchange rate strengthening to N1,353.41/$ as improved foreign exchange liquidity and stronger dollar inflows eased pressure on the domestic currency.

Market data showed the average spot exchange rate fell by N20.02 from N1,373.43/$ in July. It was the second consecutive month of improvement for the naira.

Inflows hit highest level since October 2025

Inflows into the Nigerian Foreign Exchange Market (NFEM) rose by 19 per cent month-on-month and 54 per cent year-on-year to $5.2 billion in August. That was the highest level since October 2025 and provided additional dollar supply amid sustained demand for foreign currency.

Market operators attributed the improvement to stronger foreign portfolio investment, increased exporter receipts, greater participation by local corporates and Central Bank of Nigeria (CBN) interventions.

Liquidity also showed in market turnover. NFEM turnover rose to about $14.45 billion in August from $12.69 billion in July, a 13.8 per cent increase. Average daily turnover increased to $760.43 million from $551.77 million.

Naira still saw two-way swings

The naira’s August performance was not one-directional. The currency traded between N1,335.50/$ and N1,365.10/$, giving a range of N29.60. That band was wider than the N22.50 range recorded in July, when the naira traded between N1,361.00/$ and N1,383.50/$.

On a simple range-width basis, the August band was N7.10, or 31.56 per cent, wider than July’s. The wider band indicates the currency continued to experience two-way movements despite the improvement in the monthly average rate. It also suggests the appreciation should not be interpreted as an elimination of volatility or underlying dollar-demand pressures.

Analysts caution on sustainability

Analysts said improved FX liquidity was the major factor supporting the naira’s appreciation, citing stronger inflows from foreign investors, exporters and domestic corporates, alongside CBN interventions and improved confidence in the NFEM framework.

They, however, cautioned against interpreting the recent gains as a permanent shift in the currency’s trajectory. They noted the sustainability of the appreciation would depend on continued FX inflows and adequate dollar supply to meet underlying demand.

Centrum Finance Company Limited linked the improvement in August to higher foreign exchange inflows and stronger market activity, but noted that businesses, importers and other market participants continued to generate underlying dollar demand.

The official market also benefited from an improvement in Nigeria’s external position, as foreign exchange reserves continued to rise during the month, providing additional support for external payments and confidence in the currency.

What it means for businesses and investors

For businesses, a more stable exchange rate could reduce uncertainty around the cost of imported inputs, foreign obligations and other dollar-denominated transactions. Companies that rely heavily on imported raw materials, machinery and other inputs could also benefit from lower naira costs associated with dollar purchases.

For investors, improved FX liquidity could make it easier to enter and exit the Nigerian market and repatriate investment proceeds. Stronger foreign portfolio inflows were identified as one of the factors supporting liquidity during the month.