The Nigerian naira depreciated against the US dollar for the fifth consecutive trading session as liquidity conditions tightened in the foreign exchange market. Market data indicates that the recent downward pressure on the local currency followed strategic dollar purchases by the Central Bank of Nigeria aimed at preventing excessive appreciation.
The apex bank reportedly acquired approximately $190 million over the past week, reversing its typical intervention pattern of supplying dollars to support the naira.
Official Window Closes Weaker
At the Nigerian Foreign Exchange Market (NFEM), the naira closed at N1355 per dollar, compared to N1349 previously. During intraday trading, rates fluctuated between N1351 and N1362, according to figures released by the Central Bank.
The recent intervention reduced available dollar liquidity, triggering renewed weakness in the local currency beginning last Wednesday. Analysts at TrustBanc Financial Group Limited observed that foreign exchange liquidity remains largely dependent on portfolio inflows rather than sustained export earnings.
Portfolio Flows Dominate FX Supply
The structure of dollar supply in Nigeria’s FX market continues to be driven predominantly by offshore portfolio inflows, particularly in the absence of significant contributions from international oil companies.
Market analysts warn that overreliance on portfolio capital makes the FX market vulnerable to shifts in global investor sentiment.
The CBN had previously signaled preference for a gradual recalibration of the naira rather than rapid strengthening. Analysts at Broadstreet suggest that excessive appreciation could trigger capital flight, as foreign portfolio investors might face exchange rate conversion risks and declining yields on naira-denominated assets.
External Reserves Continue to Rise
Despite short-term currency weakness, Nigeria’s gross external reserves rose marginally to $48.899 billion from $48.769 billion. A report by Ebury noted that Nigeria’s foreign exchange reserves have expanded significantly since April 2024, now covering nearly eight months of imports — a level widely considered comfortable by global standards.
CBN Governor Olayemi previously stated that improved liquidity conditions enabled the bank to reduce frequent FX interventions. The narrowing gap between official and parallel market rates further supports this strategy.
The apex bank projects reserves to exceed $51 billion in the near term, supported by higher oil earnings, reduced FX pressure, sovereign bond issuances, and increased remittance inflows from Nigerians abroad.
