The naira displayed mixed performance across foreign exchange (FX) markets as traders anticipated an uptick in inflows from exporters. According to data from the FMDQ platform, the naira weakened by 0.4% to N1,548.89 per US dollar in the Nigerian Autonomous Foreign Exchange Market.
Market transactions were conducted within a range of N1,543 to N1,550, marking a higher band compared to previous trading levels. Analysts noted that the exchange rate is gradually retracing from gains recorded during the December rally, attributing the decline to tight liquidity in the absence of consistent FX interventions.
In late 2024, the Central Bank of Nigeria (CBN) supported the naira through aggressive FX sales to authorized dealer banks, temporarily strengthening the currency against the US dollar. However, as the CBN scaled back its FX auctions, the naira has started to weaken. Last week, the CBN re-entered the market, injecting $50 million to bolster liquidity.
Despite this intervention, the exchange rate deteriorated by approximately N9, highlighting the insufficiency of the FX supply amid rising demand for the dollar. Analysts caution that the naira could face further depreciation if the CBN does not intensify its efforts to defend the currency.
Optimism for Exporter Inflows
On a brighter note, analysts are optimistic that the recent suspension of extensions on repatriating export proceeds will strengthen FX supply. Last week, the CBN announced the immediate suspension of approvals for delayed repatriation of export earnings, signaling a stricter enforcement of foreign exchange regulations.
The apex bank has previously warned exporters against diverting export proceeds to bypass the formal system. In a circular dated January 8, 2025, the CBN specified that the directive applies to both oil and non-oil export transactions. Non-oil export proceeds must be repatriated within 180 days of the bill of lading date, while oil and gas proceeds have a 90-day deadline. These deadlines are now non-negotiable, and banks are tasked with ensuring customer compliance.
In the parallel market, the naira appreciated by N5, closing at N1,655 per dollar as demand for FX to settle invisible transactions increased.
Global Market Updates
Oil prices rose for the third consecutive session, with Brent crude surpassing $80 per barrel, reaching a four-month high. The surge was attributed to expanded U.S. sanctions on Russian oil, which are expected to impact exports to key buyers such as India and China. Brent crude was last quoted at $81.03 per barrel, while WTI hovered near $78.
Meanwhile, gold prices declined as the U.S. dollar strengthened to a two-year high following robust job market data. The report reinforced expectations that the Federal Reserve would maintain a cautious approach to interest rate cuts this year.
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