Every October, Nigeria’s exchange rate tends to enter its storm season, a predictable cycle where the naira buckles under pressure before regaining composure towards the end of the year.
The pattern has been consistent enough to feel almost ritualistic.
In October 2022, the naira slipped from N735 to N795 per dollar at the official market before clawing its way back to N736 by December.
A year later, in 2023, it dramatically crossed the N1,000 threshold for the first time, plunging further to N1,180 by October before staging a modest recovery.
Even in 2024, with a supposedly freer exchange rate, the same script played out as the parallel market weakened from N1,700 in September to N1,750 in October, while the official rate dropped from N1,541 to N1,675 per dollar.
But this year, the script was quietly rewritten.
For the first time in years, the naira refused to follow the familiar October path of decline. Instead, it strengthened. According to Naijaonpoint’ currency tracker, the naira closed October 2025 at N1,427 per dollar in the parallel market, compared to N1,478 in the official market.
Even more curiously, the parallel market, which typically reacts more erratically to speculation and scarcity, appreciated slightly from N1,490 in September to N1,460 per dollar. In a country where exchange rate trends often feel like seasonal weather, this sudden calm was both surprising and telling.
The turning point appears to have come in September, when the naira broke through the N1,500 ceiling and began to build momentum. Unlike past rallies driven by temporary interventions or speculative excitement, this one seemed rooted in deeper structural and behavioural changes within the market.
Speculative demand has ebbed significantly, as fewer people are hoarding dollars. Ordinary Nigerians, financially stretched by inflation and high living costs, have little disposable income left to divert into foreign currency. Even among the political elite, the traditional dollar laundering channels have narrowed, and the new climate of scrutiny has made it safer to keep wealth in naira rather than offshore accounts.
Behind these shifts lies a broader policy reorientation at the Central Bank of Nigeria. Under Governor Olayemi Cardoso, the apex bank’s return to orthodoxy has brought a measure of credibility back to monetary management. Gone are the days of multiple exchange rate windows, opaque interventions, and unpredictable restrictions. The emphasis now seems to be on transparency, market discipline, and consistency, principles that investors and traders had long demanded but rarely received.
The results are starting to show: Nigeria’s foreign reserves have climbed to around $43 billion despite a combination of low oil prices and uninspiring crude output, a sign that confidence and portfolio inflows are quietly returning.
Institutional investors have also begun to adjust their strategies. In a high-yield environment where local currency assets now offer attractive returns, holding on to dollars looks increasingly unproductive. The opportunity cost of staying in foreign currency has risen, leading to gradual portfolio rebalancing in favor of naira-denominated investments.
Similarly, corporates that made substantial forex gains earlier in 2024 are now rushing to convert those gains before a stronger naira erodes them through mark-to-market losses. This forced conversion adds further liquidity to the domestic market and reinforces the local currency’s position.
What makes this moment significant is not merely that the naira appreciated in October, but that it defied a deeply ingrained historical pattern. For years, analysts and policymakers have treated oil prices and crude production volumes as the dominant variables in Nigeria’s exchange rate equation.
Yet, with the current free market framework and reduced policy interference, those traditional indicators seem to be losing their grip on predictive power. The market’s behavior suggests that confidence, liquidity conditions, and interest rate differentials may now carry more weight in determining currency direction than the volatile swings of the global oil market.
Yet, with the current free market framework and reduced policy interference, those traditional indicators seem to be losing their grip on predictive power. The market’s behavior suggests that confidence, liquidity conditions, and interest rate differentials may now carry more weight in determining currency direction than the volatile swings of the global oil market.
Of course, the situation remains delicate as Nigeria’s economy continues to face structural vulnerabilities such as stubborn inflation, fragile reserves, weak exports, and an overburdened consumer base.
A sudden policy reversal, geopolitical shock, or a collapse in investor sentiment could easily undo the recent gains.
But the fact that the naira managed to hold its ground, and even strengthen, during a period that has historically been its weakest, is a signal that something fundamental may be shifting beneath the surface.
Economists often cite the “impossible trilemma,” the idea that a country cannot simultaneously maintain a fixed exchange rate, allow free capital flows, and control its own monetary policy. The CBN seems to have made its choice: it has let go of tight exchange rate control in favor of market pricing, while using higher interest rates to attract capital inflows and stabilize the domestic market.
In this new framework, the path to currency stability lies not in defending artificial price levels, but in maintaining macroeconomic discipline and letting market confidence do the heavy lifting.
Cardoso calls this a “return to orthodoxy,” but it might well be something more transformative—a recalibration of how Nigeria’s currency finds its true value in an increasingly open and disciplined system.
If September marked the point where the naira broke a psychological ceiling, then October confirmed that the old cycle of seasonal weakness may finally be giving way to a new rhythm of resilience. The rule has been broken, and perhaps, just perhaps, a new one is being written.