ABUJA — The Nigerian naira is experiencing a robust rally, appreciating to a near one-month high of N1,357.26 per dollar on the official foreign exchange market. The driving force behind this recovery isn’t just an influx of foreign capital, but a significant structural shift: growing domestic refining capacity is slashing the country’s fuel import bill and cooling overall dollar demand.
According to the Central Bank of Nigeria’s (CBN) latest economic report for January 2026, the easing pressure on the foreign exchange market has fundamentally improved liquidity conditions, creating a stronger foundation for the naira.
Local Refining Cuts the Import Bill
For years, Nigeria’s reliance on imported petroleum products has been a massive drain on its foreign exchange reserves. However, expanded local refining activities have triggered a sharp decline in the economy’s structural demand for dollars.
Petroleum imports plunged by nearly 23% in just one month, falling to $570 million in January from $740 million in December 2025. This reduction helped drive total imports down to $4.20 billion, even as non-oil imports saw a slight increase.
The FX Numbers: A Dramatic Shift
As dollar demand for fuel cooled, foreign exchange flows through the economy improved dramatically. Net foreign exchange inflows essentially tripled, creating a much healthier balance of payments for the start of the year.
| Metric | December 2025 | January 2026 | Impact |
| Net FX Inflows | $3.11 Billion | $9.22 Billion | Eased market liquidity |
| Petroleum Imports | $740 Million | $570 Million | Reduced dollar drain |
| Total FX Utilisation | $4.54 Billion | $3.40 Billion | Lowered exchange volatility |
Outflows also dropped significantly across both official and autonomous channels, reinforcing the net positive inflow. Total foreign exchange utilization across the economy fell by 25.03% to $3.40 billion in January.
Capital Inflows and Market Liquidity
Beyond the reduced import bill, foreign investors are showing renewed confidence. Total capital importation surged to $3.52 billion in January (up from $1.25 billion in December), largely propelled by foreign portfolio investments into Nigerian bonds and money market instruments. The banking sector was the primary beneficiary, attracting over 75% of these total inflows.
This combination of lower dollar utilization and higher capital importation has vastly improved market liquidity. Average daily turnover at the Nigerian Foreign Exchange Market (NFEM) jumped over 55% to $587.62 million.
The ABT NEWS Takeaway: Analysts note that while foreign capital inflows remain vital, the reduction in structural dollar demand—specifically through localized fuel production—is the true anchor for the naira’s recent stability. If local refining capacity continues to expand, the naira could see sustained support throughout 2026.
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