Experts explain FX rise as CBN’s revised manual takes effect
Experts have explained the recent rise in Nigeria’s foreign reserves which reached an all time high of $50.3 billion in 17 years. Daily Trust reports that the foreign exchange market is witnessing one of its most significant periods of stability in recent years as the implementation of the Central Bank of Nigeria’s (CBN) revised Foreign […]
Experts have explained the recent rise in Nigeria’s foreign reserves which reached an all time high of $50.3 billion in 17 years.
Daily Trust reports that the foreign exchange market is witnessing one of its most significant periods of stability in recent years as the implementation of the Central Bank of Nigeria’s (CBN) revised Foreign Exchange Manual begins to reshape market dynamics, improve liquidity, and strengthen investor confidence.
The development comes as Nigeria’s external reserves surged to approximately $50.3 billion, their highest level in over a decade, while the naira recorded gains across official market segments. The twin achievements have sparked widespread discussion among economists, investors, policymakers, and financial market participants, many of whom view the gains as early evidence that ongoing reforms in the foreign exchange market are beginning to yield tangible results.
The fourth edition of the Foreign Exchange Manual, which took effect on June 1, 2026, represents a comprehensive overhaul of operational procedures governing foreign exchange transactions in Nigeria. The revised framework is expected to improve transparency, enhance market efficiency, deepen liquidity, strengthen compliance, and support a more predictable exchange rate environment.
For a country that has spent years battling foreign exchange shortages, exchange rate volatility, speculative trading, and declining investor confidence, the latest developments offer a measure of optimism.
Reserves reach new milestone
Data released by the Central Bank of Nigeria indicate that the country’s gross external reserves have continued their upward trajectory, climbing above the $50 billion threshold and reaching approximately $50.3 billion.
The reserve position represents a remarkable improvement from the levels recorded a year earlier and marks the highest reserve accumulation in several years. Analysts say the increase strengthens the country’s ability to meet external obligations, support exchange rate stability, and reassure investors about Nigeria’s capacity to manage external shocks.
External reserves serve as a critical buffer for any economy. They provide central banks with the ability to intervene in foreign exchange markets when necessary, meet international payment obligations, support import financing, and maintain confidence in the domestic currency.
The current reserve growth has been attributed to a combination of factors, including improved oil earnings, increased diaspora remittances, stronger foreign capital inflows, better exchange rate management, and ongoing monetary reforms introduced by the apex bank.
Market observers note that the reserve build-up has coincided with growing confidence in Nigeria’s foreign exchange market following a series of reforms initiated under the leadership of CBN Governor Olayemi Cardoso.
Naira shows signs of strength
Alongside rising reserves, the naira has also recorded notable gains.
Recent data published by the apex bank showed the local currency appreciating in the Nigerian Foreign Exchange Market (NFEM), with the exchange rate strengthening against the United States dollar.
The improvement has been linked to enhanced liquidity conditions, improved market transparency, and greater confidence among participants in the formal foreign exchange market.
Although the parallel market continues to exist, the gap between official and unofficial exchange rates has narrowed significantly compared to periods of severe market distortions witnessed in previous years.
Financial analysts argue that the relative stability being recorded today is partly the result of deliberate efforts by the CBN to unify market segments, improve price discovery, and reduce opportunities for arbitrage.
The emergence of a more transparent market structure has encouraged increased participation by investors who previously remained on the sidelines because of concerns about exchange rate uncertainty and access to foreign currency.
What is in the new Fx manual?
The newly introduced Foreign Exchange Manual is widely regarded as one of the most comprehensive regulatory updates undertaken by the apex bank in recent years.
The document serves as a practical guide for banks, importers, exporters, government agencies, international investors, and other participants operating within Nigeria’s foreign exchange ecosystem.
One of the key provisions of the revised manual is the authorization granted to dealer banks to conduct spot foreign exchange transactions among themselves, with customers, and with the Central Bank in approved foreign currencies for settlement within two business days.
The manual also requires that interbank foreign exchange transactions be conducted through approved electronic trading platforms. This provision is designed to improve transparency, ensure efficient price discovery, and eliminate opaque trading practices that previously undermined confidence in the market.
Authorized dealer banks are additionally required to maintain adequate credit and settlement arrangements while observing strict risk management standards and Net Open Position limits.
$10,000 cash declaration
The CBN retained the existing threshold for cross-border movement of foreign currency.
Under the guidelines, individuals may import or export foreign currency in cash or negotiable instruments up to $10,000 (or its equivalent) without declaration.
“Foreign currency, either in cash or any other credit instrument, not exceeding US$10,000.00 or its equivalent in other foreign currencies, may be imported into Nigeria by a person without declaration,” the Apex bank said.
“However, any amount above US$10,000.00 or its equivalent in other foreign currencies shall be declared at the point of entry using Form TM or at the point of exit using Form TE.”
Outbound travellers may carry up to $50,000 subject to declaration requirements.
Amounts above $50,000 require verifiable evidence showing the funds were obtained through an authorised dealer bank.
PTA to be paid via digital channels
The CBN has revised the disbursement framework for personal travel allowance (PTA).
While the maximum PTA remains $4,000 per quarter for eligible travellers aged 18 years and above, authorised dealer banks must now disburse at least 75 percent of the allowance through cards or other approved digital channels.
“The disbursement of PTA shall be a minimum of 75% via cards and other approved digital channels, while the remaining 25% shall be paid in cash,” the report added.
For students studying abroad, tuition remittances for undergraduate and postgraduate programmes are capped at $25,000 per semester and must be paid directly to the educational institution.
Also, maintenance allowance is capped at $5,000 per quarter for students living off campus.
At the official launch, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, described the new manual as part of efforts to strengthen Nigeria’s macroeconomic foundation, improve transparency, and restore confidence in the foreign exchange market.
His remarks went beyond the unveiling of a policy document, reflecting the broader direction of the current foreign exchange reforms being pursued by the apex bank under the present administration.
Cardoso made it clear that the foreign exchange market is not simply a platform for buying and selling dollars.
According to his policy philosophy, it plays a major role in determining price stability, investment confidence, and the smooth movement of goods and capital within an economy that is connected to global markets. He noted that foreign exchange is a critical enabler in any open economy because it anchors price stability, facilitates the flow of goods and capital, and shapes investor sentiment.
The Deputy Governor for Economic Policy, Mohammed Sani Abdullahi, whose presentation preceded Cardoso’s remarks, provided deeper technical details regarding the operational provisions of the manual.
Abdullahi traced the origins of the reform initiative to the assumption of office by Cardoso, noting it was initiated from the beginning of the administration to restore confidence, improve transparency, deepen liquidity, and strengthen the market.
Market experts believe these measures will contribute significantly to reducing volatility and strengthening confidence among local and foreign investors.
The manual further permits banks to transact with non-resident customers under clearly defined regulatory conditions, creating additional flexibility and enhancing market depth.
Daily Trust reports that Foreign exchange remains one of the most important pillars of Nigeria’s economy.
Virtually every aspect of economic activity is influenced directly or indirectly by developments in the foreign exchange market. Manufacturers require foreign exchange to import machinery and raw materials. Airlines need access to foreign currency to meet international obligations. Students studying abroad depend on foreign exchange for tuition and upkeep. Investors carefully monitor exchange rate conditions before making investment decisions.
When the foreign exchange market functions poorly, the consequences are often widespread.
Inflation rises as imported goods become more expensive. Businesses struggle with planning and budgeting. Foreign investors become reluctant to commit capital. Economic uncertainty increases.
For years, Nigeria experienced many of these challenges.
Multiple exchange rates, chronic foreign currency shortages, speculative activities, and inconsistent access to foreign exchange created significant distortions across the economy.
The revised manual therefore represents more than a regulatory document. It symbolizes the latest phase of broader efforts to rebuild confidence in the country’s foreign exchange architecture.
Experts explain reserve growth
Economic experts say the recent improvement in reserves reflects the cumulative impact of several policy measures implemented over the past two years.
Professor Uche Uwaleke, Director of the Institute of Capital Market Studies at Nasarawa State University, Keffi, believes recent gains demonstrate that difficult economic reforms are beginning to produce results.
According to him, progress recorded in exchange rate reforms, reserve accumulation, fiscal consolidation efforts, banking sector recapitalization, and external balance management points to improving macroeconomic conditions.
He, however, cautioned that reserve growth driven largely by short-term capital inflows may not be sustainable over the long term.
According to Uwaleke, Nigeria must prioritize attracting foreign direct investment into productive sectors such as manufacturing, agriculture, infrastructure, mining, technology, and renewable energy.
Such investments, he argued, generate employment, improve productivity, facilitate technology transfer, and create more stable sources of foreign exchange earnings than portfolio flows.
“It is a no-brainer that sustainable economic development cannot be built on speculative capital inflows. Rather, the focus should remain on attracting long-term foreign direct investment into productive sectors such as manufacturing, agriculture, technology, infrastructure, mining, and renewable energy. Such investments create jobs, transfer technology, strengthen domestic productive capacity, and generate more stable sources of foreign exchange earnings,” he said
He also noted that while exchange rate flexibility remains important, a completely free-floating exchange rate system may expose the economy to excessive volatility given Nigeria’s continued dependence on oil revenues.
In his view, a managed float system that allows market forces to operate while permitting strategic interventions by the central bank may offer a more balanced approach.
One notable aspect of the foreign exchange reforms has been the alignment between fiscal authorities, monetary policymakers, and banking industry leaders.
The reforms coincide with other major policy initiatives, including subsidy removal, tax modernization, fiscal consolidation, and efforts to improve public finances.
Analysts say policy consistency remains essential to sustaining investor confidence.
The banking industry has also welcomed the reforms.
Industry leaders argue that improved transparency, stronger documentation requirements, enhanced market governance, and digital trading systems are helping to create a more efficient market environment.
Some banking executives have pointed to a remarkable shift in market conditions compared to previous years.
Where banks once struggled to meet customer demand for foreign exchange, improved liquidity has increasingly encouraged customers to sell foreign exchange through formal market channels.
This trend, they say, reflects growing confidence in the official market and a reduction in the incentives that previously drove participants toward unofficial channels.
Evidence of improving investor confidence can also be seen in Nigeria’s latest capital importation figures.
According to data released by the National Bureau of Statistics, total capital importation reached $10.37 billion during the first quarter of 2026.
The figure represents a substantial increase compared to the corresponding period of 2025 and underscores growing investor appetite for Nigerian financial assets.
Portfolio investment remained the dominant component of capital inflows, accounting for the overwhelming majority of total foreign capital imported during the quarter.
Money market instruments and bond investments attracted significant foreign interest, reflecting investor confidence in Nigeria’s monetary policy direction and improving macroeconomic outlook.
However, analysts continue to express concern about the relatively modest contribution of foreign direct investment.
Despite recording some improvement, FDI remains a small proportion of total capital inflows.
Experts argue that while portfolio investments can provide valuable liquidity, long-term economic transformation ultimately depends on attracting productive investments capable of expanding industrial capacity, creating jobs, and generating sustainable growth.