During March, the exchange rates of the Nigerian naira (NGN) deteriorated against the U.S. dollar (USD) across foreign exchange markets, despite substantial foreign exchange interventions in both the official and parallel markets.
The naira experienced a 3% decline, even though the Central Bank of Nigeria (CBN) injected over $1 billion into the official window to bolster foreign exchange market inflows.
A significant surge in U.S. dollar demand intensified the exchange rate dynamics, causing the naira to struggle against the greenback. The exchange rate trend observed in the official window indicated that the naira’s performance would have been significantly worse without aggressive foreign exchange interventions throughout March.
The official window exhibited relative stability last week, supported by an improved supply of dollars from the CBN. Early in the week, the CBN sold $41.6 million at rates ranging from N1,527.50 to N1,531, contributing to the stabilization of exchange rate fluctuations.
By midweek, the CBN injected an additional $27.9 million, with the NGNUSD pair trading within a narrow range, according to a report by AIICO Capital Limited. Despite minor fluctuations, the exchange rate remained stable as demand experienced a slight increase. On Friday, trading ranged between N1,520.00 and N1,542.00, with the naira appreciating marginally by 0.5 basis points week-on-week, closing at N1,536.82.
In March, the CBN sold $1.03 billion to support the market. Despite this, the official exchange rate depreciated by 3.00%, closing at N1,536, and the parallel market rate declined by 3.23%, closing at N1,550, bringing its year-to-date gains to 0.09% and 6.13% in the official and parallel markets, respectively, according to TrustBanc Financial Group Limited.
The nation’s foreign exchange reserves decreased for the second consecutive week, by $913.14 thousand, reaching $38.33 billion. In the forwards market, the naira rates increased across all contracts. The one-month foreign exchange forward contract appreciated by +0.5%, closing at N1,572.44; the three-month contract rose by +1.3%, closing at N1,635.09; the six-month contract climbed by +2.4%, closing at N1,727.16; and the one-year contract rallied by +4.8%, closing at N1,899.27 per dollar.
Analysts anticipate that the CBN will continue to support market liquidity amidst weak foreign portfolio investor participation in the foreign exchange market. This will contribute to maintaining the naira’s stability at current levels in the short term.
Oil prices experienced a decline on Friday, as concerns grew that U.S. tariff disputes could trigger a global economic recession. However, prices remained on track for a third consecutive weekly gain, driven by escalating U.S. pressure on Venezuela and Iran.
Brent crude futures fell by 49 cents, or 0.6%, to $73.54 per barrel, while WTI crude dropped by 61 cents, or 0.9%, to $69.31. Meanwhile, gold surged to a record high, as investors sought safe-haven assets amidst fears of a trade war.
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