The exchange rate in the foreign exchange (FX) market stabilized as the Central Bank of Nigeria (CBN) intervened with $360 million to support the naira, countering increased demand for the U.S. dollar. On Friday, the naira rebounded against the dollar in last-minute transactions, bolstered by increased liquidity from the CBN. The exchange rate appreciated by 2%, settling at N1,517.93 in the official market.
The naira faced significant volatility throughout the week due to an FX liquidity shortfall carried over from the previous week. This fluctuation caused instability against the dollar before a late recovery driven by improved market inflows.
Market Performance & FX Interventions
Spot FX data from the CBN indicated that the naira gained N29.89 following FX sales to banks. Market liquidity was further strengthened by inflows from foreign investors and a decline in foreign payment demand. According to AIICO Capital Limited, FX interventions and offshore inflows boosted dollar supply in the official market. However, demand pressure remained high, causing fluctuations in the exchange rate throughout the week.
The CBN sold $188.10 million to banks in its latest auction, with exchange rates ranging between N1,532.00 and N1,540.00 per dollar. This brought the total FX sales for the week to $360 million, as reported by investment banking firm TrustBanc Financial Group Limited.
Despite these interventions, the naira faced depreciation due to persistent demand pressures. However, by the end of the week, liquidity improved, with trades occurring between N1,480 and N1,548 per dollar.
External Reserves & Forward Market Trends
CBN data revealed that Nigeria’s external reserves increased by $12.06 million, reaching $38.36 billion, marking a slight recovery after nine consecutive weeks of decline.
In the FX forwards market, the naira’s value dipped across different contract tenors:
- 1-month contract declined 0.6% to N1,577.80
- 3-month contract fell 0.8% to N1,654.10
- 6-month contract dropped 0.7% to N1,764.98
- 1-year contract depreciated 0.8% to N1,965.95
Despite the challenges, improved liquidity towards the end of the week suggests a potential stabilization of the naira in the near term.
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