Naira Stabilises at 1,350 Per Dollar as CBN Reforms Deliver Sustained Forex Market Convergence

The Nigerian Naira, long regarded as one of the most volatile currencies in emerging market finance, has entered a period of remarkable stability that few analysts would have predicted even twelve months ago. Trading consistently around 1,350 Naira to the United States dollar on the official market, the currency has achieved a level of equilibrium that reflects both the success of Central Bank of Nigeria reforms and the structural adjustments taking place across the broader economy.

The transformation has been led by CBN Governor Olayemi Cardoso, who took office in late 2023 with a mandate to restore credibility to the central bank and repair the dysfunctional foreign exchange system he inherited. Under his leadership, the CBN has undertaken a comprehensive overhaul of its monetary operations, most notably through the reform of the Open Market Operations framework that had previously become a channel for opaque liquidity management and preferential allocation of foreign exchange.

The reformed OMO framework operates on principles of transparency, market-based pricing, and equal access. Where the previous system relied heavily on discretionary allocation and bilateral negotiations, the new framework uses competitive auctions to determine both the volume and price of foreign exchange supplied to the market. The results have been striking. Liquidity in the official market has improved substantially, the backlog of unmet foreign exchange demand that had accumulated over several years has been largely cleared, and the spread between the official and parallel market rates has narrowed to approximately 2 percent, a fraction of the 60 percent premium that existed before the reforms.

The parallel market, which had served as the de facto reference rate for many businesses and individuals unable to access official channels, has effectively converged with the NAFEM window. This convergence is significant because it eliminates the arbitrage opportunities that previously incentivised round-tripping and speculative behaviour, and it restores the integrity of the official market as the primary channel for legitimate foreign exchange transactions.

Diaspora remittances have emerged as a powerful driver of foreign exchange supply, with inflows reaching approximately $19 billion in the twelve months to March 2026, according to CBN data. The central bank's decision to allow recipients of diaspora remittances to receive payments in US dollars through their bank accounts has been a game-changer, removing the previous requirement that remittances be converted to Naira at below-market rates. The introduction of the Nigeria Quick Response code payment system, commonly known as NQR, has also facilitated the documentation and tracking of remittance flows, providing better data for policy purposes and reducing the share of remittances that flow through informal channels.

The impact on external reserves has been positive. Nigeria's gross external reserves have grown to $48.7 billion, up from approximately $33 billion at the beginning of 2024, reflecting improved foreign exchange inflows from both remittances and the gradual normalisation of crude oil export revenues. The reserve position now provides approximately eight months of import cover, comfortably above the three-month minimum recommended by the IMF and well within the range considered adequate for a commodity-dependent economy.

Governor Cardoso has been careful to avoid declaring victory prematurely, noting that the current stability must be sustained through continued policy discipline and structural reform. In a recent address to the Lagos Business School, he emphasised that exchange rate stability is an outcome, not a policy objective in itself, and that the central bank's primary focus remains on price stability and the preservation of the value of the Naira through sound monetary policy.

The monetary policy framework has been strengthened through several key initiatives. The Monetary Policy Committee has adopted a more data-driven approach to interest rate decisions, with regular assessments of inflation expectations, credit growth, and external sector developments. The inflation targeting framework has been refined, with a clearer communication strategy that helps market participants understand the policy trajectory. The MPC has kept the benchmark interest rate steady at 24.75 percent in its last two meetings, signalling that while inflation is moderating, the battle is not yet won.

The banking sector has played a constructive role in the foreign exchange reforms. Commercial banks, which were previously seen as beneficiaries of the opaque allocation system, have adapted to the new market-based framework and are now competing on service quality, speed of execution, and pricing. Several banks have invested in digital platforms that make it easier for businesses and individuals to access foreign exchange for legitimate transactions, and the processing time for typical trade finance requests has improved significantly.

The manufacturing sector, which was among the most vocal critics of the foreign exchange regime, has acknowledged the improvement in market conditions. While many manufacturers continue to face challenges related to the overall level of the exchange rate, which has depreciated significantly from the artificially low levels maintained under previous regimes, the predictability and transparency of the current system has made planning and budgeting more feasible. The Manufacturers Association of Nigeria reported in its latest survey that foreign exchange availability has improved for its members, with the proportion reporting difficulty accessing forex declining from 78 percent in 2024 to 35 percent in early 2026.

The oil and gas sector remains the largest source of foreign exchange for Nigeria, and the CBN has worked closely with the NNPC to ensure that crude oil export proceeds are promptly repatriated and made available through the official market. The resolution of longstanding disputes between NNPC and its joint venture partners, combined with improved production volumes, has contributed to a steady increase in dollar inflows from the sector.

Looking ahead, the sustainability of Naira stability will depend on several factors. Continued fiscal discipline by the federal government is essential, as excessive borrowing or the reintroduction of fuel subsidies could undermine the reform momentum. The non-oil export sector must grow to diversify the sources of foreign exchange earnings, reducing Nigeria's vulnerability to oil price fluctuations. And the central bank must maintain its commitment to market-based pricing, resisting the political temptation to fix the exchange rate at an unsustainable level.

For now, the evidence suggests that Nigeria's foreign exchange market is functioning more efficiently than it has at any point in the past decade. The Naira's stability is a testament to what can be achieved when policy is grounded in economic principles, implemented with transparency, and sustained through institutional resolve. The challenge for the CBN and the broader economic management team is to build on this foundation and ensure that the gains are not reversed.