The Nigerian naira has faced slight depreciation against the US dollar due to increasing pressure on the foreign exchange market. Despite strong liquidity levels, the naira has been struggling amid declining foreign reserves.
This week, the naira weakened slightly, trading at ₦1,499.76 per US dollar in the official market. This marks the third consecutive day of slight depreciation. Despite this, the market remains liquid, thanks to improved participation from foreign investors and continued foreign exchange (FX) supply from the Central Bank of Nigeria (CBN).
What’s Affecting the Naira?
One of the key factors affecting the naira is the decline in Nigeria’s foreign reserves. The country’s reserves have dropped by $1.34 billion since the start of the year, reaching $39.548 billion from $40.883 billion in early 2025. This decline is due to increased FX outflows, including payments for foreign obligations and US dollar auctions provided to local banks.
Last week, the naira had shown strong appreciation due to the CBN’s interventions. These interventions included increased FX supply from international oil companies and foreign portfolio investors, which helped maintain liquidity and stabilize the exchange rate.
In the parallel market, where currency trading occurs outside official channels, the naira appreciated slightly to ₦1,555 per dollar. This was influenced by the CBN’s decision to extend $25,000 in FX sales to Bureau de Change operators at the official rate. This move helped ease some pressure on the local currency.
Oil Prices and Global Market Impact
The global oil market has also played a role in Nigeria’s economic situation. Oil prices recently dropped by over 2% due to an increase in US crude and gasoline stockpiles, which signaled lower demand. Additionally, concerns over a potential trade war between China and the US have raised fears of slower global economic growth.
Brent crude futures, a key benchmark for global oil prices, fell by $1.55 (2.03%), settling at $74.65 per barrel. Meanwhile, the US West Texas Intermediate (WTI) crude dropped by $1.57 (2.16%) to $71.13 per barrel.
Gold’s Role in Economic Uncertainty
As market uncertainty continues, investors have been moving toward safe-haven assets like gold. Gold prices have been on an upward trend, with spot gold rising by 1.2% to reach $2,875.15 per ounce. Earlier in the session, it hit a record high of $2,882.16 per ounce.
Analysts believe that if sanctions against Iran are reinstated, oil prices could rise again due to reduced supply. However, production adjustments by OPEC+ (a group of major oil-exporting countries) may not be enough to counterbalance the effects of global market fluctuations.
Overall, Nigeria’s financial markets are navigating a complex environment influenced by foreign exchange dynamics, oil price fluctuations, and global economic developments. While the naira faces challenges, continued interventions by the CBN and strong foreign investor confidence could help stabilize the currency in the long run.
