The Nigerian currency recorded its fourth consecutive trading-session decline after the Central Bank of Nigeria stepped up dollar purchases, reinforcing signals that authorities are wary of an overly strong naira.
According to market experts, substantial foreign capital entered Nigeria’s fixed-income and equity markets — particularly Open Market Operations (OMO) bills — when the exchange rate traded between ₦1,450 and ₦1,500 per dollar.
With the naira strengthening toward the ₦1,300 range, some investors may prefer to exit early and secure gains rather than risk currency reversals. Such exits would likely increase demand for U.S. dollars, placing renewed pressure on the FX market.
Analysts also referenced developments in early 2025, when global risk aversion — triggered by U.S. tariff tensions — forced Nigeria to deploy roughly $5 billion in FX reserves to defend the currency.
Given that experience, policymakers appear cautious about allowing rapid appreciation that could destabilize capital flows.
Official Market Movement
The official exchange rate weakened to ₦1,349 per dollar on Monday after reports confirmed that the CBN absorbed about $190 million from the FX market last week. Nevertheless, on a week-on-week basis, the naira still appreciated by 0.68%, closing at ₦1,346.32/$1 compared to ₦1,355.42/$1 previously. Midweek, the currency strengthened to a high of ₦1,338.11/$1 before moderating toward the weekend.
FX Inflows Breakdown
Research from Coronation Merchant Bank showed total weekly FX inflows of $648.2 million. Foreign Portfolio Investors accounted for $364.8 million — representing 56.3% of total inflows — underscoring the dominance of external capital in current FX supply.
Other contributors included:
- Exporters: $168.8 million (26.0%)
- Non-bank corporates: $93.7 million (14.5%)
- Individuals: $10.0 million (1.5%)
- Other sources including FDIs: $10.8 million (1.7%)
Notably, there were no direct FX inflows from the CBN. Instead, the apex bank acted as a buyer, purchasing $189.80 million to moderate the pace of appreciation, according to TrustBanc Financial Group.
Policy Implication
The recent actions suggest that Nigeria’s monetary authorities are prioritising exchange rate stability over aggressive strengthening. While a firmer naira can reduce import costs and inflationary pressures, excessive gains risk triggering capital reversals in a market heavily influenced by foreign participation.
For now, the CBN appears focused on maintaining equilibrium — supporting confidence without inviting volatility.
