The Nigerian naira weakened against the US dollar in the foreign exchange market due to increased demand. The currency has been volatile since last week when the Central Bank of Nigeria (CBN) paused its intervention in the market.
With rising demand for the dollar, the naira struggled, closing in negative territory three times this week. According to investment firm AIICO Capital Limited, the pressure on the naira was mainly due to offshore investors seeking to repatriate funds.
Analysts say that foreign investors often demand US dollars to transfer dividends abroad, especially from multinational companies operating in Nigeria. In addition, matured Open Market Operation (OMO) bills, which were brought into the economy last year, also contributed to the increased demand for dollars.
At the same time, the CBN sold OMO bills to banks and foreign investors, bringing in some foreign exchange inflows. However, in the official forex market, the exchange rate fluctuated between ₦1,505.00 and ₦1,520.00 per dollar, according to AIICO Capital Limited.
Data from the FMDQ platform showed that the naira depreciated by 0.77%, closing at ₦1,512.30 per dollar. Meanwhile, Nigeria’s foreign exchange reserves remained stable at $38.416 billion as the CBN paused its interventions. However, this move has contributed to the naira’s decline across all exchange markets.
In the parallel market, the exchange rate stood at ₦1,520 per US dollar due to a shortage of foreign currency and global economic uncertainties.
Oil Prices and Gold Market Update
Oil prices saw little movement after a volatile trading session. Brent crude settled below $70 per barrel, affected by trade tensions involving the US, Canada, and China, as well as OPEC+ plans to increase production.
Brent crude futures rose by 16 cents (0.2%) to $69.46 per barrel, while US West Texas Intermediate (WTI) crude inched up by 5 cents (0.1%) to $66.36 per barrel.
Meanwhile, gold prices declined as rising US Treasury yields led investors to cash out profits. Spot gold dipped by 0.1% to $2,915.83 per ounce, while US gold futures remained steady at $2,926.60 per ounce.
Analysts expect oil prices to remain volatile due to OPEC’s production plans, optimism surrounding a possible Russia-Ukraine peace deal, and ongoing trade policy uncertainties.
