The naira depreciated by approximately N19 against the US dollar last week as rising demand for foreign currencies outpaced supply in the Nigerian forex market. Despite the Central Bank of Nigeria (CBN) intervening for seven consecutive sessions, the local currency weakened at the official window, closing at N1,536.89 per dollar.
The CBN sold a total of $230.90 million to authorized dealers, including $92.10 million toward the end of the week, in an effort to stabilize the exchange rate. However, external reserves fluctuated, with Nigeria’s gross FX reserves tracking below $38.4 billion, according to CBN data.
Market analysts believe that maintaining high interest rates is essential to sustaining naira stability, as forex inflows largely depend on the interest of foreign portfolio investors (FPIs) in Nigerian assets.
At the start of last week’s trading session, the naira traded at N1,528.03 per dollar before depreciating to N1,532.93. By midweek, the CBN’s dollar sales of $38.65 million provided temporary relief, strengthening the exchange rate slightly to N1,530.52. Additional interventions totaling $92.1 million helped stabilize the naira at N1,530.62 before it ultimately fell to N1,536.89 by the week’s close, marking a 1.25% decline.
Meanwhile, gross FX reserves declined by $2.65 million to $38.36 billion, reflecting ongoing pressures on external buffers. FX forward contracts also showed mixed trends—1-month and 3-month contracts appreciated slightly by 0.1%, closing at N1,578.82 and N1,655.95 per dollar, respectively. However, the 6-month contract dipped by 0.2% to N1,768.61, while the 1-year forward rate dropped by 1.1% to N1,989.81 per dollar.
Despite CBN interventions, analysts at Cordros Capital noted that near-term risks to naira volatility persist. Foreign portfolio participation in the FX market remains weak, partly due to concerns over declining oil revenues. Additionally, the expiration of the crude-for-naira agreement with Dangote Refinery is expected to increase demand pressures, as the refinery transitions to selling petroleum products in US dollars rather than naira.
