The Naira closed 2025 with a notable appreciation against the United States Dollar, trading at N1,435.76/$1 on the last day of the year in the Nigerian Autonomous Foreign Exchange Market (NAFEX). This marked an improvement of 0.69 per cent or N9.92 from the previous day’s trading. The domestic currency also saw gains against the Pound Sterling, closing at N1,934.25/£1, and the Euro, ending at N1,687.88/€1. This positive movement at the official market reflects a broader trend influenced by the Central Bank of Nigeria’s (CBN) efforts to strengthen aggregate supply and ensure economic stability throughout the year. The CBN’s consistent FX interventions, including significant sales to banks, have played a crucial role in stabilizing the exchange rate. What is the outlook for the Naira in 2026? The Central Bank of Nigeria anticipates that external reserves will reach $51.04 billion in 2026, a significant increase from the $45 billion recorded in 2025. This projected growth in reserves is expected to be driven by reduced pressure in the foreign exchange market, fueled by anticipated rises in oil earnings, successful sovereign bond issuances, and increased diaspora remittance inflows. These factors collectively contribute to a more robust economic environment. The Nigerian currency maintained its stability against the US Dollar in the parallel market, holding steady at N1,480/$1, and also at the GTBank FX counter, where it traded at N1,452/$1. This dual performance highlights the varying dynamics within different segments of the foreign exchange market. The CBN’s commitment to intervention has been a constant theme, aiming to mitigate volatility and foster confidence among market participants. These interventions are designed to ensure that Nigeria’s economy remains on a stable footing, even amidst global economic uncertainties. Looking ahead to 2026, the CBN projects that monetary conditions will be relatively loose. This forecast is based on the macroeconomic stability observed throughout 2025, with expectations that inflation and exchange rate risks will continue to subside. Such conditions are typically conducive to economic growth and investment, providing a more predictable environment for businesses and individuals alike. The anticipated rise in oil earnings is a key component of this positive outlook, offering a vital source of foreign exchange. In contrast to the currency market, the cryptocurrency sector experienced a downturn. Low liquidity and a decline in risk appetites weakened price levels across several benchmarked tokens. For instance, Cardano (ADA) saw a 4.5 per cent decrease, trading at $0.3358, while Dogecoin (DOGE) declined by 3.8 per cent to $0.1182. This trend extended to other major cryptocurrencies, with Ripple (XRP), Litecoin (LTC), Bitcoin (BTC), Solana (SOL), and Binance Coin (BNB) all experiencing depreciation. However, not all cryptocurrencies followed this downward trend. Ethereum (ETH) managed to appreciate by 0.1 per cent, closing at $2,972.66. Stablecoins like US Dollar Tether (USDT) and US Dollar Coin (USDC) remained flat, both trading at $1.00. The divergence in performance within the crypto market underscores the inherent volatility and specific market forces at play in this asset class. Understanding these dynamics is crucial for investors navigating this space. The stability of the Naira against the US Dollar in the parallel market at N1,480/$1 is a significant point of observation. While the official market shows appreciation, the parallel market often reflects different pressures and sentiments. The CBN’s ongoing interventions are a critical factor in bridging the gap between these markets and ensuring a more unified exchange rate environment. These efforts are part of a broader strategy to enhance the efficiency of the foreign exchange market. The Central Bank of Nigeria’s proactive approach to managing the exchange rate is evident in its consistent FX interventions. By selling millions of dollars to banks, the apex bank aims to prevent drastic fluctuations and maintain a predictable economic landscape. This strategy is crucial for attracting foreign investment and fostering business confidence, both of which are vital for long-term economic development. The goal is to create an environment where the Naira’s value is stable and predictable. The projected increase in external reserves to $51.04 billion by 2026 is a strong indicator of Nigeria’s potential economic resilience. This influx of reserves is expected to be bolstered by several factors, including improved oil revenue, successful bond issuances, and increased remittances from Nigerians living abroad. These diverse income streams contribute to a more diversified and stable economic base, reducing reliance on any single sector. The anticipation of looser monetary conditions in 2026, stemming from observed macroeconomic stability in 2025, suggests a favorable environment for economic activity. As inflation and exchange rate risks are expected to subside, businesses may find it easier to plan and invest, potentially leading to job creation and economic growth. This forward-looking approach by the CBN aims to set the stage for a prosperous year. The Naira’s performance against the Euro saw it close at N1,687.88/€1, reflecting an appreciation of N12.39 from the previous session. Similarly, gains were observed against the Pound Sterling, with the Naira closing at N1,934.25/£1, an improvement of N17.42. These movements indicate a strengthening of the Naira across multiple major currencies, reinforcing the positive sentiment in the official foreign exchange market. The cryptocurrency market’s decline, with Bitcoin (BTC) shrinking by 1.0 per cent to $87,504.02, highlights the risks associated with volatile digital assets. While some investors are drawn to the potential for high returns, the recent performance serves as a reminder of the significant price fluctuations that can occur. This contrasts sharply with the more stable outlook for the Naira in the official market. The Central Bank of Nigeria’s commitment to stabilizing the exchange rate through continuous intervention is a cornerstone of its economic policy. The year-end closing rate of N1,435.76/$1 in the official market is a testament to these sustained efforts. The focus remains on ensuring that the Naira’s value is managed effectively to support economic growth and stability. The expected rise in oil earnings is a critical factor in the CBN’s optimistic forecast for 2026. As a major oil-producing nation, fluctuations in global oil prices significantly impact Nigeria’s foreign exchange reserves. The anticipation of increased earnings suggests a favorable outlook for global energy markets or improved production levels. The stability observed in the Naira against the US Dollar in the parallel market at N1,480/$1 provides a contrasting perspective to the official market’s gains. Understanding the interplay between these two markets is essential for a comprehensive view of the currency’s true value and the pressures it faces. The CBN’s strategy of strengthening aggregate supply aims to meet the demand for foreign currency more effectively, thereby reducing upward pressure on the exchange rate. This is a fundamental aspect of managing a healthy foreign exchange market and ensuring economic stability for the nation. The projected increase in diaspora remittance inflows is another positive sign for Nigeria’s external reserves. Remittances from overseas workers form a significant source of foreign currency, contributing to the country’s balance of payments and providing much-needed support for the Naira. The overall economic outlook for 2026, characterized by anticipated macroeconomic stability and subsiding inflation risks, paints a promising picture for Nigeria. This stability is crucial for attracting both domestic and foreign investment, fostering business expansion, and ultimately improving the living standards of citizens. The Naira’s performance is a key indicator of this broader economic health.
