Naira firms as external reserves hit 18-year high of $53.34bn

The naira extended its gains across foreign exchange market segments on Wednesday as Nigeria's external reserves climbed to an 18-year high of $53.34 billion. Improved dollar liquidity and sustained reserve accretion are underpinning the local currency.

Data from the Central Bank of Nigeria showed the naira appreciated by N3.39, with the dollar quoted at N1,343.59 on Wednesday, compared with N1,346.98 on Monday at the Nigerian Foreign Exchange Market. In the parallel market, the naira steadied at N1,405 per dollar. The gap between the official and parallel market rates widened to 4.62 percent from 4.38 percent on Monday.

FX turnover jumps

Market liquidity improved sharply, with total turnover in the interbank segment of the FX market jumping 54.66 percent to $235.99 million on Wednesday from $152.59 million on Monday. The number of deals also rose 47.92 percent, from 144 to 213.

Wednesday's NFEM deals and turnover figures were not available as of reporting time, but activity had moderated slightly earlier in the week. Total turnover declined 3.27 percent to $731.18 million on Monday from $755.87 million on Friday. The number of deals at the NFEM, however, surged 196.33 percent from 109 on Friday to 323 on Monday.

Reserves at 18-year peak

Nigeria's gross external reserves, which give the CBN firepower to defend the naira and meet external obligations, have maintained a steady growth trajectory. They rose to an 18-year high of $53.11 billion as of August 24, 2026, representing a 28.85 percent increase from the $41.22 billion recorded in the same period of 2025. The last time reserves reached a similar level was on December 24, 2008, when they stood at $53.34 billion.

According to a report by United Capital Plc, Nigeria's reserve performance in the first half of 2026 showed a clear three-phase pattern: early stability, sustained drawdown and late-period recovery. The major drivers include increased crude oil revenue, higher capital importation, an improved net export balance, rising remittances and growing confidence in the economy.

“The current level of the reserves is enough to cover over 10 months of imports. It also provides stability for Naira stability and possibly appreciation. Our revised forecast for year end is $53.25bn. This will be enough to cover over 13 months imports,” analysts at United Capital said.

Import cover and CBN support

Quest Merchant Bank Limited reported that gross external reserves increased by $465 million month-on-month to $51.9 billion at the end of July 2026, the third consecutive month of accretion. This followed increases of $1.9 billion and $1.2 billion in June and May respectively, bringing gains to $6.4 billion in the first seven months of 2026.

Quest attributed the sustained accumulation to elevated crude oil prices amid Middle East tensions, a gradual recovery in Nigeria's output to about 1.7 million barrels per day, robust capital inflows supported by CBN FX reforms, and a tight monetary policy stance. Gross reserves provide an estimated 14.5 months of merchandise import cover and 10 months of total import cover, based on balance of payments data for the 12 months to December 2025.

The CBN said net external reserves increased to $40.0 billion in July 2026 from $34.8 billion at the end of 2025. That translates to about 11.2 months of merchandise import cover and 7.7 months for total imports, well above the conventional three-month adequacy benchmark.

To manage seasonal demand pressures, the CBN sold about $1.4 billion in July, up from $320 million in the previous month. The liquidity support helped preserve orderly market conditions and contributed to the naira's modest appreciation to N1,368 per dollar during the month.

Regional context

Beyond Nigeria, Egypt's net external reserves rose by $1.2 billion month-on-month to $56.3 billion, driven by robust capital inflows and favourable revaluation gains on gold. South Africa's international liquidity position increased by $424 million to $71.8 billion, supported by valuation gains on gold and foreign currency assets.

“We remain constructive on Nigeria's external position, with reserve buffers expected to strengthen further on the back of supportive oil market dynamics, resilient capital inflows, and the credibility of the monetary authorities' policy framework,” analysts at Quest Merchant Bank Limited said.

For the naira, the rising reserves give the CBN more room to intervene and steady the currency. That supports confidence among businesses and importers who rely on predictable access to dollars.