July 2026 Edition 2
Nigeria’s official foreign exchange market entered 2026 under pressure, but by the end of the first half the data show a market that had become materially more orderly than it was at the turn of the year. The most important evidence lies in the behaviour of the Nigerian Foreign Exchange Market [NFEM] rate, which declined from US$/₦1,430.85 on 2 January 2026 to US$/₦1,372.41 on 1 July 2026, implying a ₦58.44 gain (-4.1%). More broadly, compared with the US$/₦1,661.12 level recorded on 2 December 2024, the NFEM rate has appreciated by about 17.4%, highlighting how far the official market has retraced from the extreme dislocations that marked late 2024 and early 2025. That improvement, however, was not linear. The first quarter of 2026 was still marked by stress, including a sharp spike in March, before the market settled into a narrower and more credible trading band in April–June.
The data suggest that Q2 2026 was the turning point. By then, the NFEM rate had moved away from the deep volatility seen earlier in the year and began to trade largely within the US$/₦1,356–US$/₦1,384 corridor, with a noticeably tighter dispersion around the average rate. At the same time, the market began to show much stronger transactional depth: NFEM turnover accelerated sharply from March onward, rising from US$8.19 billion in March to US$8.51 billion in April, US$8.99 billion in May, and US$12.92 billion in June 2026. In June 2026, interbank activity also strengthened, indicating that the official market was not merely recording a better headline rate but was also seeing more participation and liquidity. Taken together, the numbers point to a market that became more functional and more liquid in H1 2026, even if it has not yet eliminated the risk of renewed volatility.
The longer-run picture is striking. The NFEM rate averaged in the mid-US$/₦1,500s in early December 2024, when the official market was still grappling with acute pricing pressure, wide trading bands and uneven liquidity. From that point, the rate trended lower through much of 2025 and into early 2026, although the path was uneven. By January 2026, the market had already moved meaningfully off its late-2024 highs, with the NFEM rate opening the year at US$/₦1,430.85 and then easing through the month to US$/₦1,386.55 by January 30, a monthly improvement of ₦44.29. February extended that correction, taking the NFEM rate down to US$/₦1,363.40 by month-end.
However, the data show that the market was not yet fully anchored. March 2026 was the most unstable month of the year, with the NFEM rate swinging between a low of US$/₦1,344.42 and a high of US$/₦1,405.62. That 61-point range was the widest monthly NFEM span in H1 and coincided with elevated day-to-day trading spreads. The month began at US$/₦1,378.02, spiked to US$/₦1,405.62 on 9 March, and still closed at US$/₦1,386.72. This was the clearest sign that the Naira’s recovery was still vulnerable to bouts of demand pressure, thin liquidity pockets and uneven price discovery.
From April 2026 onward, the character of the market changed. April saw the NFEM rate average US$/₦1,361.22, down from US$/₦1,379.98 in March, while the month-end rate settled at US$/₦1,374.94. May then delivered the most convincing evidence of stability: the NFEM rate averaged US$/₦1,370.00, but more importantly traded within a relatively tight US$/₦1,355.85–US$/₦1,375.62 band. By June, the average NFEM rate remained broadly stable at US$/₦1,366.99, and although the month-end rate moved up to US$/₦1,379.68, the overall range was still far narrower than the turbulence seen in March. The 1 July 2026 NFEM print of US$/₦1,372.41 suggests the market began the new month on a somewhat firmer footing than where June closed.
Three distinct phases emerge during the period.
First, January–February was a correction phase. The Naira appreciated sharply from the weak levels seen at the start of the year, as the NFEM rate fell from the low US$/₦1,430s to the mid-US$/₦1,360s. This was a meaningful recovery and likely reflected improved FX supply conditions relative to late 2024, better market alignment around official pricing, and a market gradually adjusting to the post-reform FX architecture.
Second, March was a stress test. The return of NFEM volatility in March indicates that the market had not fully resolved its liquidity and confidence challenges. The spike above US$/₦1,400 and the month’s elevated average intraday spread show that price discovery was still fragile. Put differently, the Naira had improved from its worst levels, but the official market was still vulnerable to pressure when flows thinned or demand intensified.
Third, April–June was a stabilisation phase. This is the strongest conclusion from the NFEM rate, which settled into a much narrower trading corridor, average monthly levels became more predictable, and turnover rose substantially. The market did not deliver a straight-line appreciation through Q2, but it did show something arguably more important: greater orderliness. A stable official market is not one in which the exchange rate only strengthens; it is one in which the exchange rate can absorb demand and supply without disorderly jumps. On that score, Q2 looks materially better than Q1.
The NFEM story becomes more convincing when viewed alongside turnover. For the first two months of 2026, turnover data was absent, but from March 9 onward, it showed a clearer picture of market depth. A notable progression was observed:
That sequence matters because a firmer NFEM rate without corresponding liquidity would be difficult to interpret as genuine market improvement. Here, the opposite is true: the period of greater exchange-rate stability coincided with a marked increase in transaction value, particularly in June. This suggests the market was not simply being “held” at a given level with thin trades; rather, more volume was being executed around the prevailing rate.
Interbank turnover also reinforces the point. It rose from US$17.32 billion in March to US$18.64 billion in April, US$15.00 billion in May, and then surged to US$26.67 billion in June. While the monthly path was not perfectly linear, June’s jump is especially important because it coincided with the heaviest NFEM turnover of the year in the period. An implication that June combined rate resilience with deeper market participation, a healthier combination than a stable rate supported by weak volumes.
The number of deals tells a similar story. June recorded some of the strongest transaction activity in the sample, with daily NFEM deal counts frequently in the 200–400 range and interbank deals often above 100 per day. This points to a broader base of counterparties and a market that was functioning with more continuity than the zero-deal or thin-deal patterns that appear in earlier periods of the series.
Another useful way to assess the quality of FX market stabilisation is to examine the spread between the day’s highest and lowest traded rates. This provides a rough sense of how orderly price formation was within each session.
The data show that March 2026 had the widest average intraday spread in H1, at about ₦16.68, compared with ₦12.17 in February, ₦11.41 in April, ₦6.28 in May, and ₦8.65 in June. The compression in May is particularly important. It suggests that by that point, dealers were transacting within a much narrower band and the market had fewer abrupt dislocations during the trading day. June’s spread widened slightly relative to May, but remained far below the March stress episode.
That is why the June uptick in the NFEM month-end rate to US$/₦1,379.68 should not be read in isolation as a renewed decline. On its own, the June closing level shows some softening relative to mid-month lows; but when placed beside the turnover data and the still-moderate spread profile, it looks more like two-way market adjustment within a broadly stabilised band than a return to disorder.
The 1 July 2026 NFEM rate of US$/₦1,372.41 is a modest but important signal. It came in ₦7.28 stronger than the 30 June rate of US$/₦1,379.68, suggesting that the new month opened with some recovery after the late-June softening. The day’s highest and lowest traded rates, US$/₦1,378.50 and US$/₦1,368.00, also point to a market that, while still active, remained within the narrower corridor that has characterised the second quarter.
What makes this print more meaningful is context. July 1 did not occur in a vacuum; it followed a June in which NFEM turnover hit its highest monthly level in the period, and interbank activity also strengthened. In that sense, the July opening print appears consistent with a market that still has support from improved liquidity conditions, even if it has not yet broken decisively into a higher appreciation trend.
The broad conclusion is that Nigeria’s official FX market was significantly more stable in Q2 2026 than it was at the start of the year, and dramatically more stable than the conditions reflected in late 2024. The NFEM rate has appreciated meaningfully over the full period, but the more important development is the shift from a disorderly, highly stressed market to one that is beginning to exhibit better liquidity, tighter trading ranges, stronger turnover and more credible price formation.
Still, this should not be mistaken for a fully solved FX market. March demonstrated how quickly the Naira can come under pressure when market conditions tighten, and June’s mild month-end weakening shows that stability remains conditional rather than permanent. For the improvement to prove durable, the market will need to sustain the liquidity gains recorded in Q2, preserve confidence in the official pricing mechanism, and continue attracting sufficient autonomous inflows to meet demand without renewed disruptions.
Overall, the NFEM rate has moved from being a symbol of acute FX stress to a clearer indicator of gradual market normalisation. H1 2026 suggests the Naira market has found firmer ground. The next test is whether that ground can hold when liquidity conditions become less favourable, or heightened demand pressure rises again.
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