Nigerian banks have regained their footing in the foreign exchange market, with net foreign assets (NFA) rising to the highest level in over a decade, thanks to sweeping currency reforms that have increased market liquidity and eased funding pressures.

According to a joint report by Fitch Ratings and Renaissance Capital Africa, the banking sector’s NFA rebounded to $7.7 billion by the end of 2024, reversing years of negative balances that once forced lenders to lean heavily on the Central Bank of Nigeria (CBN) and correspondent banks to settle trade obligations.

The liberalisation of the naira and improved FX market turnover have allowed the sector to “return to a net foreign asset position” —something not seen in more than ten years, Fitch said in its latest outlook.

This turnaround reflects the impact of reforms launched mid-2023 under new CBN leadership, including the unification of exchange rates, increased FX supply via autonomous sources, and a scaling back of the CBN’s role in direct intervention.

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Banks had previously struggled to meet dollar demand, with many being forced to settle Letters of Credit from their own books due to limited CBN support. The chronic FX shortages had even raised concerns over sovereign default risks and triggered bank downgrades.

But the recent recovery in FX liquidity has eased those strains. Fitch noted that the improvement was also buoyed by CBN’s clearing of large FX swap backlogs, enabling banks to rebuild FC liquidity buffers and enhance trade finance operations.

“The sector is now less dependent on the CBN for FX settlements, and more capable of supporting importers and multinationals,” one Lagos-based treasury executive said.

While exchange rate volatility has eased, inflation and regulatory headwinds persist — most notably the prohibition of net long FX positions and the 70 percent windfall tax on FX gains. But banks are now operating with stronger buffers and more flexibility in currency management than at any point in the past decade.

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Still, analysts warn that the recovery may be fragile. Any reversal in FX inflows or renewed pressure on the naira, especially in the absence of oil price support, could see banks slip back into a net foreign liability position.
To further support the resilience and capital base of the banks, the CBN introduced a recapitalisation programme, which was formally introduced in 2023.

The programme is designed to align the banking sector with Nigeria’s broader economic development goals and ensure banks remain well-capitalised in line with the evolving demands of a growing economy.

The majority of Nigerian banks have either met or are firmly on track to meet the new capital thresholds ahead of the March 31, 2026 deadline set by the apex bank.

For now, however, the data marks a clear win: Nigeria’s FX reforms are finally delivering, and the banking sector—long caught in the crossfire—is breathing again.