Central Bank of Nigeria moved decisively in the foreign exchange market last week, purchasing nearly $190 million in a strategic effort to temper the naira’s rapid appreciation at the official window.
After a period of sustained strengthening, the local currency reversed course in the final three trading sessions of the week, suggesting that policymakers were actively moderating the pace of gains.
Why the CBN Stepped In
Market analysts had cautioned that an aggressive rally in the naira could create unintended distortions in Nigeria’s financial system. Specifically, a sharply appreciating currency risks prompting foreign portfolio investors to liquidate positions in fixed-income securities.
Such exits would likely trigger heightened demand for the U.S. dollar, potentially destabilizing liquidity conditions and accelerating capital outflows.
To forestall that scenario, the CBN shifted tactics. Rather than injecting dollars into the market — a strategy it has used in the past — the apex bank opted to absorb excess foreign currency supply.
According to a market update from TrustBanc Financial Group Limited, the CBN purchased $189.80 million during the week to smooth volatility and prevent excessive strengthening of the naira.
Exchange Rate Performance
Despite the intervention, the naira recorded notable week-on-week gains across both exchange segments.
- At the official window, the currency strengthened by ₦9.09 to close at ₦1,346.32 per dollar.
- In the parallel market, it appreciated by ₦60 to settle at ₦1,340 per dollar.
Importantly, the foreign exchange spread narrowed sharply to 0.47%, down from 3.29% the previous week. The tightening gap reflects increasing convergence between the official and parallel market rates — a development widely seen as a positive signal for currency transparency and stability.
Macro Factors Supporting Stability
Analysts note that Nigeria’s improving macroeconomic fundamentals are reinforcing currency resilience. Stronger global oil prices, rising external reserves, and sustained reform-driven capital inflows continue to provide structural support.
However, geopolitical uncertainties and external market shocks remain risk factors that policymakers must navigate carefully. By stepping in to moderate gains rather than defend losses, the CBN appears focused on preserving orderly market conditions while avoiding volatility that could unsettle investor confidence.
