The overall economic outlook for both the global and domestic economies in the short to medium-term remains uncertain as the effects of supply chain disruptions occasioned by the Russian Ukraine crisis, elevated global instability. The lingering impact of the Covid-19 pandemic, as well as the broad shocks to foreign capital flows following rate hikes by most advanced economies continue to dampen growth expectations both in Nigeria and worldwide. Hence, this study examined the nexus between financial openness and financial system stability in Nigeria. Annual time series data were sourced from the Central Bank of Nigeria and World Development indicators. Financial system stability index was calibrated using the Principal Component Analysis (PCA), while financial openness was captured by de’ factor and de’ jure approaches. The study applied the bound testing and granger causality estimation techniques for data analysis. A long run relationship was found among the variables in the estimated model. From the study, it was revealed that financial openness has a positive and significant impact on financial system stability in Nigeria. Predicated on the findings, the study recommends that credit expansionary policies by the apex bank should be vigorously pursued in order to increase credits to private sector as the engine of growth, while lowering the rate of interest on loans and advances. The repositioning of the capital markets should be the focal driver of policy makers and monetary authorities. Tighter monetary policy stance to contain inflationary pressures should be undertaken by the central bank while financial regulators should continuously monitor existing and emerging foreign exchange risks, and vulnerabilities to the financial system with a view to deploying appropriate macro and micro prudential tools to mitigate the risks.