Naira tops African FX charts in 2026, but cracks emerge beneath rally

By: Amarachi Okonkwo 

Nigeria’s currency has emerged as one of Africa’s strongest performers so far in 2026, defying a volatile global backdrop shaped by geopolitical tensions and shifting capital flows.

A report by United Capital Plc shows the naira has appreciated 6.7 per cent against the US dollar year-to-date as of April 24. This places it ahead of several major African peers, many of which have recorded mild to significant losses over the same period. 

The Kenyan shilling has slipped 0.27 per cent, the Angolan kwanza 0.09 per cent, the South African rand 0.34 per cent and the Ghanaian cedi 5.30 per cent.

Read Also:

• suntrust-bank-appoints-kudi-badmus-executive-director
• United Capital declares N18bn dividend as profit surges 16% in 2025

Reform gains and stronger buffers

According to Ayodele Akinwunmi, chief economist at United Capital, the naira’s relative strength reflects a combination of improved policy credibility, stronger external buffers and better foreign exchange (FX) supply conditions.

He pointed to sustained reforms by the Central Bank of Nigeria, including measures to enhance transparency in the FX market and tighten oversight of transactions. These steps, alongside inflows from both oil and non-oil exports, have helped stabilise the currency and reduce volatility.

Nigeria’s external reserves have also played a key role, giving the central bank room to intervene when needed. Elevated reserves, combined with increased FX inflows, have supported liquidity and helped the naira maintain its footing despite external shocks.

Early signs of strain

However, recent data suggest that underlying pressures are beginning to build.

The naira weakened by N14.57 week-on-week to close at N1,364.24 per dollar at the Nigerian Foreign Exchange Market, a 1.07 per cent depreciation from the previous week. At the parallel market, the currency remained steady at around N1,400 per dollar, narrowing the gap between official and informal rates to N36.

Analysts say the recent softening reflects a slowdown in FX liquidity and a gradual decline in reserves. Data from the Central Bank of Nigeria show external reserves fell 3.16 per cent to $48.44 billion as of April 23, down from a peak of $50.02 billion recorded in March.

Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co, noted that increased central bank intervention has helped sustain the naira despite weakening underlying liquidity conditions.

Liquidity decline and intervention surge

FX market activity has also moderated. Data from FMDQ Securities Exchange show total inflows declined 7 per cent month-on-month to $4.1 billion in March.

Analysts at Quest Merchant Bank attributed the decline partly to seasonal trends but highlighted a sharp drop in inflows from local individuals, which fell to $22.2 million from $697.8 million in the previous month.

In response, the Central Bank stepped up its intervention, with FX sales rising 112 per cent month-on-month to $691 million in March. Exporter inflows remained relatively stable, dipping slightly by 2 per cent to $770.3 million.

Despite these efforts, the naira had already shown signs of pressure earlier in the year, depreciating about 1.3 per cent month-on-month in March to close near N1,387 per dollar.

Remittances fall short of target

Another weak spot is remittance inflows, which have declined sharply in recent months. Central bank data show direct remittances dropped 46.22 per cent to $107.47 million in January from $200.31 million in December.

Olayemi Cardoso, governor of the Central Bank of Nigeria, has set an ambitious target of $1 billion in monthly remittance inflows by year-end, up from roughly $600 million currently.

To achieve this, the apex bank is rolling out measures including enabling Bank Verification Numbers (BVN) for Nigerians in the diaspora and integrating international money transfer operators to improve efficiency and reduce friction in formal FX channels.

Cardoso said the regulatory groundwork has largely been laid, adding that banks now need to develop products that incentivise diaspora Nigerians to use official channels. Early indicators, he noted, suggest momentum may be improving.

Diverging currency paths across Africa

Across the continent, currency performance is increasingly diverging, reflecting differences in economic fundamentals, policy frameworks and exposure to global commodity cycles.

Countries with stronger export diversification or tightly managed exchange regimes such as Tunisia, Libya and Morocco have maintained relative stability, while commodity-linked and more market-driven currencies have faced varying degrees of pressure.

South Africa’s rand continues to serve as a regional benchmark, while currencies in smaller economies like Eswatini and Lesotho remain pegged to it.

Global shocks complicate outlook

The evolving conflict in the Middle East is adding another layer of uncertainty, driving volatility across global currency markets and reshaping trade and energy flows.

A joint policy brief by the African Development Bank, African Union, United Nations Development Programme and United Nations Economic Commission for Africa said the impact across Africa remains uneven.

Nigeria could benefit from higher oil prices and increased domestic refining capacity, while countries such as South Africa, Namibia and Mauritius are experiencing increased maritime traffic as shipping routes adjust.

However, the brief warned that these gains may not fully offset rising inflationary pressures, fiscal constraints and broader external vulnerabilities.

Balancing reform and resilience

The naira’s performance so far in 2026 underscores the impact of recent reforms and active central bank management. Yet, the emerging strain in FX liquidity, declining reserves and weak remittance flows highlight the fragility beneath the surface.

For policymakers, the challenge will be to sustain investor confidence and FX inflows while navigating an increasingly uncertain global environment ensuring that recent gains in currency stability are not undermined by structural liquidity constraints.