Naira gains as CBN opens discount window to banks trading FX, government securities

The naira appreciated against the dollar in the official foreign exchange market on Thursday after the Central Bank of Nigeria (CBN) removed restrictions preventing banks from accessing its discount window following FX and government securities transactions.

The dollar was quoted at N1,357.65 on Thursday, down from N1,360.58 on Wednesday at the Nigerian Foreign Exchange Market (NFEM). That represented a gain of N2.93 for the local currency. In the parallel market, the naira steadied at N1,424 per dollar, widening the gap between official and parallel rates to 4.94 percent from 4.71 percent the previous day.

Activity at the FX market

Activity at the interbank segment of the FX market declined sharply. The number of deals dropped by 48.42 percent, from 190 on Wednesday to 98 deals on Thursday. Total turnover also fell by 53.13 percent to $79.09 million, down from $168.76 million recorded on Wednesday.

While NFEM figures for deals and turnover were not available as of the time of reporting, activity had increased the previous day. Total turnover at the NFEM rose to $607.47 million on Wednesday, a 228.38 percent increase from the $184.99 million recorded on Tuesday. The number of deals at the NFEM also jumped by 119.89 percent, from 186 on Tuesday to 409 deals on Wednesday.

External reserves hit 17-year high

Nigeria’s external reserves, which give the CBN the firepower to defend the naira and meet external obligations, have maintained steady growth. They rose to a 17-year high of $52.19 billion as of August 12, 2026. This represented a 28.39 percent increase compared with the $40.65 billion recorded in the corresponding period of 2025, according to data published on the CBN website.

CBN lifts restrictions on discount window access

The CBN has removed restrictions that previously stopped banks from accessing its Standing Lending Facility (SLF), also known as the Discount Window, after participating in foreign exchange transactions and primary auctions of government securities. The move is part of a review of the framework governing access to the Discount Window, Tenored Repo Operations and participation in Open Market Operations (OMO), as the apex bank seeks to improve money market functioning and strengthen monetary policy implementation.

In a circular signed by Okey Umeano, acting director of the Financial Markets Department, the CBN said restrictions on access to the Discount Window arising from participation in the Nigerian Foreign Exchange Market had been removed. The bank also removed restrictions arising from participation in primary auctions of government securities.

The changes mean banks can now participate in the FX market and buy government securities at primary auctions without such activities limiting their access to the CBN’s Standing Lending Facility.

Analysts see deeper market activity

Analysts at Quest Merchant Bank Limited said the reforms should improve market liquidity, strengthen monetary policy transmission and deepen participation in the fixed-income market.

“The measures 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,” the analysts said.

For the naira and Nigerian businesses, the policy shift signals a more flexible financial system, with banks freer to trade in FX and government securities while still having access to CBN liquidity support. That could support market confidence and reduce funding strains over time.