Naira Recovery, $55bn Reserves Fail To Stop Nigeria’s Market Ranking Slide

…Ghana Overtakes Nigeria As Country’s Score Declines

…Report Flags Weak FX Rules, Poor Market Depth, Limited Investment Options

Nigeria’s efforts to strengthen its foreign exchange market and deepen capital-market activities have yet to translate into improved competitiveness, as the country’s position in the 2026 Absa Africa Financial Markets Index declined amid concerns over market transparency, foreign exchange arrangements and limited investment opportunities.

The country dropped two places to eighth position, with its overall score falling from 65 to 63 in the latest assessment, while Ghana advanced four places to sixth position with 64 points, overtaking Nigeria.

The report, released by the Official Monetary and Financial Institutions Forum (OMFIF) in partnership with Absa Group, highlighted the uneven pace of financial-market development across Africa, despite improvements in economic conditions and financial-market infrastructure in several countries.

Nigeria’s performance contrasted with the broader continental trend, as 21 of the 29 countries assessed recorded improvements in their scores, compared with 10 countries in the previous edition.

The average score rose to 56, its highest level in the index’s 10-year history.

The index evaluates African countries on their capacity to develop financial markets that mobilise domestic savings, attract foreign investment and provide businesses with alternatives to traditional bank financing.

South Africa retained the top position with 85 points, followed by Mauritius with 77 and Namibia with 71. Uganda ranked fourth with 68 points, while Kenya placed fifth with 65.

The report identified weaknesses in Nigeria’s foreign exchange arrangements and reporting framework as major factors behind the country’s declining performance, despite reforms introduced since 2023 to improve liquidity, stabilise the naira and strengthen the functioning of the foreign exchange market.

Nigeria’s score under the foreign exchange pillar fell by eight points to 70, although the country received full marks for foreign exchange reserve adequacy and maintained a relatively high level of market liquidity.

According to the report, the decline reflected shortcomings in the rules governing foreign exchange transactions and reporting, underscoring the need for a transparent, predictable and consistent framework to complement improvements in reserves and liquidity.

The assessment acknowledged several measures undertaken by the Central Bank of Nigeria (CBN), including the unification of foreign exchange windows, clearance of a $7bn backlog of unmet foreign exchange obligations, interest-rate increases and the gradual withdrawal of interventions with fiscal characteristics.

However, the report indicated that improvements in foreign exchange availability and external reserves had not been matched by sufficient progress in the institutional arrangements required to support confidence and transparency in the market.

Nigeria’s performance across the index’s other indicators was also mixed. Its market-depth score declined by one point to 56, while its market-transparency score dropped by five points to 88.

The country’s pension fund development score fell by three points to 17, the lowest among its six assessed pillars. The macroeconomic environment was the only category in which Nigeria recorded an improvement, gaining four points to reach 65.

Its score for legal standards, tax and the regulatory environment remained unchanged at 84.

The findings suggest that recent improvements in Nigeria’s currency performance and external reserves have not fully addressed structural weaknesses affecting the development of its financial markets.

The naira strengthened against the United States dollar during the second half of 2025 after substantial depreciation following the foreign exchange reforms introduced in 2023 and 2024.

The currency maintained a firmer position in 2026, supported by improved foreign exchange liquidity, stronger external reserves and measures aimed at improving market operations.

Data from African Markets, a real-time market-tracking platform cited in the report, showed that the naira was the second-best-performing currency among 17 African currencies against the dollar as of October 13, 2026, having appreciated by nearly eight per cent year-to-date.

Nigeria’s external reserves also rose to $55 billion, their highest level in 18 years, according to the CBN.

Nevertheless, the report noted that currency appreciation and stronger reserves had not necessarily translated into easier access to foreign exchange for businesses, particularly manufacturers that require dollars to import raw materials, machinery and other production inputs.

The Manufacturers Association of Nigeria’s second-quarter 2026 Manufacturers’ CEO Confidence Index identified inadequate foreign exchange supply as one of the challenges confronting manufacturers.

The association also raised concerns over the continued imposition of multiple taxes and levies by different collectors and regulators, despite the introduction of the Nigeria Tax Act 2025.

These challenges underline the gap between improvements in macroeconomic indicators and the conditions businesses face in accessing foreign exchange and financing productive activities.

Beyond foreign exchange market weaknesses, the Absa index identified limited market depth and concentrated investment opportunities as constraints on Nigeria’s financial-market development.

Nigeria has introduced several measures intended to expand its capital market, including the Investments and Securities Act 2025, which broadened the legal framework for investment products, and a commercial paper listing and trading platform designed to improve businesses’ access to capital-market financing.

The banking-sector recapitalisation programme has also increased the capital base of financial institutions.

According to the report, 33 banks had met the new capital requirements by April 1, 2026, raising N4.7tn, equivalent to $3.1bn.

Domestic sources accounted for 72.6 per cent of the funds, while international sources contributed 27.5 per cent, with the combined percentage exceeding 100 per cent because of rounding.

The Securities and Exchange Commission also approved 83 registrations by six issuers worth N1.3tn in the first nine months of 2026, including N493.2 billion in repeat issuances.

Despite these developments, Nigeria’s market-depth score declined, reflecting concerns that growth in market capitalisation and trading activity has not sufficiently broadened investment participation.

The report noted that trading on the Nigerian market remained concentrated in a relatively small number of large companies, while government borrowing continued to account for a substantial share of market activity.

Such concentration limits the range of investment opportunities available to domestic and international investors and constrains the market’s ability to channel long-term funds to a broader range of businesses.

Pension fund investment patterns further illustrate the challenge.According to 2024 data cited in the report, government bills and bonds accounted for 74 per cent of Nigerian pension assets, while cash and deposits represented 12 per cent.

Equities accounted for 11 per cent, with other asset classes making up the remaining three per cent.

The report attributed the limited diversification partly to the shortage of suitable domestic investment opportunities, alongside concentrated share ownership, low liquidity and the relatively small number of listed companies.

It also noted that corporations held more than half of listed equities in Nigeria, Ghana and Tanzania, while domestic institutional investors accounted for less than five per cent.

This structure limits the ability of pension funds and other institutional investors to provide long-term financing to businesses and support broader participation in equity markets.

Nigeria and Botswana recorded the largest declines in the 2026 index, losing two points each. Rwanda also lost two points, while Eswatini and Tunisia recorded one-point declines.

In contrast, Cabo Verde recorded the largest improvement, gaining seven points to reach 56. Ghana added six points to 64, while the Democratic Republic of Congo gained five points to reach 47. Seychelles, Lesotho and Malawi each improved by four points.

The report attributed the overall improvement across African financial markets to more favourable macroeconomic conditions, stronger foreign exchange reserve adequacy and advances in transparency.

However, it warned that global uncertainty, including trade tensions, conflicts in Ukraine and the Middle East, and elevated energy costs, could undermine economic stability and investment flows across the continent.

For Nigeria, the findings indicate that currency stabilisation, reserve accumulation and the introduction of new financial instruments will need to be supported by more predictable foreign exchange rules, stronger market transparency and a broader range of investable assets.

The index, which assesses 29 African countries against established benchmarks for financial-market development, covers six areas: market depth, access to foreign exchange, transparency, pension fund development, the macroeconomic environment, and legal standards and enforceability.

Nigeria’s historical scores have fluctuated over the past five years. Its score stood at 63 in 2022, rose to 64 in 2023, declined to 60 in 2024, recovered to 65 in 2025 and fell again to 63 in 2026.

The report concluded that the next phase of reform across African financial markets should prioritise greater market depth and resilience, with Nigeria facing the additional task of translating its recent foreign exchange and financial-sector reforms into broader investment participation and more effective access to capital for businesses.

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