Naira climbs to five-month high of N1,338/$ as dollar supply improves

The naira appreciated to a five-month high at the official foreign exchange market on Thursday, helped by stronger dollar liquidity. Data from the Central Bank of Nigeria (CBN) showed the dollar was quoted at N1,338.59 on Thursday, up N5 from N1,343.59 on Wednesday at the Nigerian Foreign Exchange Market (NFEM).

In the parallel market, the naira gained N8 to close at N1,397 per dollar on Thursday, from N1,405 previously. The gap between the official and parallel market rates narrowed to 4.41 percent on Thursday, down from 4.62 percent on Wednesday.

Market activity improves

Although NFEM figures for deals and turnover were not available as at the time of reporting, market activity had improved earlier in the week. Total turnover jumped by 24.97 percent to $913.76 million on Wednesday, from $731.18 million recorded on Monday. The number of deals at the NFEM also surged by 48.29 percent, from 323 on Monday to 479 on Wednesday.

At the interbank segment of the FX market, however, the number of deals dropped by 17.37 percent to 176 on Thursday, from 213 deals on Wednesday. Total turnover also declined by 18.77 percent to $191.69 million on Thursday, compared with $235.99 million recorded on Wednesday.

External reserves at 18-year high

Nigeria’s external reserves, which give the CBN the firepower to support the naira and meet external obligations, have maintained a steady growth trajectory. Reserves rose to an 18-year high of $53.29 billion as of August 26, 2026, according to data published on the CBN website. That represents a 29.28 percent increase from $41.22 billion recorded in the corresponding period of 2025.

MDU Capital sees naira below N1,000

A report by MDU Capital dated August 27, 2026, said the naira has a significant valuation gap and could strengthen to below N1,000 per dollar over the next 12 months. MDU Capital estimates the naira’s MZM (money-supply) fair value at N984.70/$1 as of June 2026. That is already below the N1,000 level and about 29 percent below the N1,385 parallel-market spot rate used in the report.

The report said a re-rating toward this trend could place the dollar below N1,000 by mid-2027. It uses three measures to estimate the naira’s fair value: MZM (money supply), the forward rate (CIRP), and an MDU Capital 90/10 blend. The MZM measure is described as the most liquidity-driven estimate, while the forward-rate measure reflects interest-rate parity and market pricing.

For June 2026, the report’s chart showed the parallel-market spot rate at N1,385/$, MDU Capital’s fair-value estimate at about N1,043/$ and the MZM fair-value estimate at N984.70/$. The report argues that the MZM-implied rate has tracked the naira’s spot rate closely during periods of efficient pricing, making it useful as a fair-value benchmark. It said the persistent difference between the spot rate and MZM rate signals periods of inefficient pricing.

12-month scenario

MDU Capital’s scenario extends the June 2026 trend to June 2027. It projects a base-case rate of N1,229/$ and an MDU scenario of N933/$ by June 2027. The report therefore sees the possibility of the naira moving below N1,000/$ by June 2027 if the exchange rate converges toward its estimated fair-value path.

Importantly, MDU Capital describes this as a scenario-based view, not a guaranteed forecast or investment recommendation. The report also said the assumptions underlying the 12-month scenario may not hold.

For Nigerian businesses and consumers, the narrowing gap between official and parallel rates, alongside rising reserves, points to improving dollar supply. But the CBN still faces the test of sustaining this momentum, and analysts warn that fair-value projections depend on market conditions holding steady.