The Central Bank of Nigeria (CBN) increased its intervention in the foreign exchange market in December 2025 as dollar liquidity rebounded after several months of pressure, according to market data released by FMDQ.
Total dollar supply into Nigeria’s foreign exchange market improved month on month, reversing the sharp contraction recorded in November.
The recovery was largely driven by higher foreign exchange sales by the apex bank, signalling a more active policy stance aimed at stabilising liquidity and anchoring exchange rate expectations amid subdued offshore participation.
Market participants noted that the CBN’s stepped-up dollar sales played a critical role in cushioning the FX market during a period typically characterised by thinner flows and reduced investor activity. While inflows from some private-sector sources remained uneven, official intervention helped offset weak sentiment from foreign portfolio investors toward the end of the year.
Despite the improvement, overall FX supply levels remained below historical norms, highlighting lingering vulnerabilities in Nigeria’s external inflow structure.
Offshore inflows continued to trail earlier peaks, reflecting cautious positioning by global investors as they focused on year-end portfolio adjustments and profit-taking rather than new risk deployment.
The naira traded within a narrow range during the period, reflecting the stabilising impact of improved liquidity conditions.
The currency closed marginally softer at the Nigerian Foreign Exchange Market, while the parallel market remained largely unchanged, suggesting a temporary equilibrium between supply and demand across both segments.
Nigeria’s external reserves also recorded a modest uptick, strengthening the CBN’s capacity to intervene in the market when necessary.
Higher reserve levels provide the monetary authority with additional buffers to manage volatility and sustain confidence, particularly as structural reforms in the FX market continue to take effect.
Governor Olayemi Cardoso has repeatedly emphasised that recent reforms are designed to improve transparency, price discovery, and discipline across the FX ecosystem. These include the introduction of a formal FX code and the deployment of an electronic matching framework intended to reduce opacity and narrow distortions between official and parallel market rates.
Analysts expect FX conditions to remain sensitive to policy direction in early 2026. While offshore participation is projected to recover gradually, the pace is likely to depend on domestic macroeconomic stability, inflation trends, and global monetary conditions, including signals from the Federal Reserve.
