The naira strengthened against the dollar on Thursday as improved dollar availability and rising external reserves bolstered the currency, though trading volumes fell at the interbank market.
Data from the Central Bank of Nigeria showed the naira gained N1.87 to close at N1,367.76 per dollar on the official market, up 0.14 percent from N1,369.63 the previous day.
The parallel market told a different story. The naira lost N7 to finish at N1,407 per dollar, representing a 0.5 percent decline from Wednesday's N1,400 rate.
This widened the gap between official and parallel rates to 2.93 percent from 1.8 percent a day earlier. The spread reflects lingering concerns about currency stability despite recent gains.
Activity at the interbank segment weakened considerably. Turnover dropped 19.76 percent to $334.13 million from $416.42 million, while deal numbers fell to 122 from 198.
Earlier in the week, the Nigerian Foreign Exchange Market (NFEM) had shown stronger momentum. On July 22, deal numbers jumped 33.23 percent to 417 from 313 on July 21.
However, turnover at the NFEM slipped 24.06 percent to $1.2 billion from $1.5 billion the day before. The mixed signals suggest uneven investor appetite.
Nigeria's external reserves climbed to $52.03 billion as of July 22, marking a 17-year high. The reserves were 35.6 percent stronger than the $38.37 billion held in the same period last year, CBN figures showed.
Coronation Merchant Bank analysts credited the naira's outperformance to several factors working in tandem. "The naira exhibited notable resilience during H1 2026, outperforming our expectations despite heightened global uncertainty," the bank told reporters.
The bank had projected an average rate of N1,382 per dollar for the first half and N1,456 by year-end. Instead, the currency averaged roughly N1,365, they noted.
Better foreign exchange liquidity and stronger reserves powered the gains. So did recovering oil production and steady foreign capital flows, according to Coronation.
Crude output lagged expectations through much of the first half before reaching 1.74 million barrels per day in June. But higher global prices driven by Middle East tensions offset the shortfall in earnings.
Foreign portfolio investors fuelled much of the strength, particularly into fixed-income securities. "Robust foreign portfolio inflows into the fixed-income market, particularly Open Market Operations securities, driven by elevated domestic interest rates and attractive real yields, alongside improved FX liquidity supported by sustained CBN interventions and stronger external reserves," Coronation said in its report.
