Decline in govt revenue raises anxiety over high naira’s effect on FX gains

….as CBN wades in, mops up dollars to slow naira surge

The continuing recovery of the  nation’s currency in the foreign exchange market has thrown Nigeria’s political and economic managers into confusion, Business Hallmark can report 

According to BH findings, the sustained appreciation of the naira in the last few months, apart from helping to bring down inflationary pressures, has added its own headaches.

Several sources in government informed our correspondent that though welcomed, the naira resurgence is threatening to undermine government’s current fiscal plans.

It would be recalled that the Nigerian currency had experienced a resurgence, buoyed by several factors, especially the coming on board of Dangote Refinery in Lagos, FX reforms introduced by the current administration, as well as the surge, rise in foreign reserves, and rally in oil production and prices.

These factors have raised the prospects for the naira and Nigeria’s external reserves, signaling a turnaround for the nation’s economy.

However, naira’s continuing recovery had brought with it some unintended consequences. One of such consequences is the sharp decline in revenues from foreign exchange rate gains shared monthly by the three tiers of government.

According to BH checks, from a low of N640 million in June 2024, revenue from exchange rate gains jumped to N364.9 billion in December 2024 when a naira exchanged at N1,800 for a dollar. In subsequent months, revenues from FX gains rose to between N500 billion to N600 billion

Facing Catch 22

However, with the local currency appreciating and closing at N1,366.23 per dollar at the end of trading on Friday, March 13, 2026, well above the 2026 budget estimate of N1,400, FX gains enjoyed by the national and sub-national governments have disappeared.

According to a source in the ministry of finance of a South West state, who did not want his name in print, the federal, states and local governments enjoyed the windfall from FX gains while it lasted.

“If you can recollect, previous budget FX estimates ranged between N1,500 to N1,600, while naira actually exchanged for a dollar well above N1,700.

“It’s these differentials of N150 to N300 on every dollar sold by the government that we shared monthly. Unfortunately, proceeds from FX trade have dried up.

“Not only that, it has started to distort our investments and fiscal plans. The federal and many states governments had invested in financial instruments using old exchange rates of over N1,500. So, this appreciation had eroded the gains we expect to make on these investments”, the source said.

Investigation revealed that as a result of the FX gains loss, many states of the federation and the Federal Government have not been able to fund many projects.

The trend, sources in government warned, could also affect the 2027 general elections.

“Already, the Federal Government is stretched to the limit. Year upon year, capital projects are not well funded because of lack of funds. This development, I think, will exacerbate the problem. The only saving grace is the Middle East crisis, which has pushed up the price of crude oil in the international market. I pray it (war) does not end soon”, another government source added

Windfalls For Stop

According to available records,

a gross FX gain of N2.836 trillion was recorded in 2023, while N2.517 trillion was shared for the year.

Apart from losing revenue from FX rate differentials, Nigeria largely benefits from a weaker naira with the nature of its economy. This is so because once converted, crude oil and gas proceeds, which are paid for in foreign currencies, translate to more naira inflows

“In simple terms, the weaker the naira, the more generous those oil receipts appear in the federation accounts”, said Ugodre Obi-chukwu, a newspaper publisher and financial analyst.

There is also the issue of non-oil exports. It was learnt at the weekend that the  federal government is worried about the dwindling revenue from Nigerian exports.

Some exporters, who spoke to BH on the matter said they have been earning far less on exported goods in recent times compared to what they used to earn.

“A stronger dollar means more naira for the exporter and the government. But a stronger naira means less money in hand. The same $1,000 proceed from an exported cargo of goods that fetched between N1,700 to N1,800, now fetch us about N1,400. That’s about N300 to N400 shortfall on every dollar earned.

“This means that naira appreciation, as good as it sounds to ordinary Nigerians, might not be good for the economy as a whole”, the concerned coal exporter noted.

Meanwhile, BH checks revealed that the Federal Government, through the Central Bank of Nigeria (CBN), has been intervening to keep the naira stable by periodically mopping up dollars in the FX markets.

CBN Intervention

This is a clear departure from the past where the apex bank supplied the market with FX to prevent the naira from sliding.

According to a report by the TrustBanc Financial Group Limited, the CBN purchased $189.80 million in the last week of February 2026.

Knowledgeable sources in the nation’s financial system disclosed that the intervention was not a one-off effort as the bank had made several interventions in the last three months in a move to absorb excess supply and moderate naira gains.

As a result of the interventions, the local currency depreciated to around N1,400 in the official market in the first and second week of March 2026, before recovering again in the last five trading sessions of Monday, March 9th to March 13, 2026.

Financial experts, who spoke on the development, welcomed the CBN’s intervention, warning that the naira’s successive rally would have pushed  foreign investors to exit the fixed-income market.

“And selling down their interests in investment securities could have led  to a spike in demand for the U.S dollar with the potential of plunging the market into abysmal conditions as a result of dollar outflow from the economy”, a financial expert explained.

This view is corroborated by Ugodre Obi-chukwu, who said the CBN might not actually want the naira to strengthen too much at this stage.

“A stronger currency may look attractive on paper, but in the current economic context, it could easily become a Greek gift. The risk lies partly in the structure of Nigeria’s monetary strategy.

“For years, the CBN has relied on relatively high interest rates to attract foreign portfolio investors.These investors, commonly known as FPIs, bring in foreign exchange and provide liquidity to domestic financial markets.

“However, the strategy works best when investors keep their money in the country for a reasonable duration. If the naira strengthens too quickly, investors, who entered when the currency was weaker can exit early and still lock in handsome gains.

“That dynamic undermines the CBN’s preference for longer-term capital inflows. A currency that strengthens too rapidly can inadvertently become an invitation to leave sooner rather than later.

Nigerians Suffer To Save Govt

“Higher interest rates, which are necessary to attract foreign capital, also increase government borrowing costs. The authorities, therefore, find themselves in a familiar dilemma: between a rock and a hard place, or perhaps between the oil barrel and the bond market.

“The central bank intervenes selectively rather than continuously. When the naira strengthens sharply, the CBN may purchase dollars to build reserves. And when the currency weakens excessively, it may sell dollars to smooth volatility.

The goal is not to dictate the price of the Naira but to keep the market from spiraling into panic.

“Taken together, these factors suggest why the exchange rate may hover around the N1,400 range for some time”, Ugodre Obi-chukwu explained.