By BizWatch Nigeria
Key Points
- Naira appreciates to N1,365/US$1 at official market
- Interbank FX turnover rises to nearly $60 million
- Foreign portfolio investors account for 47% of FX inflows
- Analysts project range-bound movement for the naira
Main Story
The naira recorded a modest gain against the US dollar at the Nigerian Foreign Exchange Market (NFEM), appreciating to N1,365/US$1 on Monday from N1,374.94/US$1 recorded at the close of last week.
The appreciation was driven by improved FX liquidity and increased interbank market activity, with turnover nearing $60 million, according to data from the Central Bank of Nigeria.
During the trading session, the naira reached an intraday high of N1,374.50 and strengthened further to an intraday low of N1,362, reflecting sustained demand-supply balance in the market.
Interbank FX turnover printed at $39.93 million across 85 deals, highlighting stronger participation compared to the previous trading sessions.
Liquidity and Market Drivers
The local currency has remained relatively stable despite a significant 83% drop in CBN FX intervention in April, indicating growing reliance on autonomous FX sources.
Total FX inflows for the week stood at $520 million, with foreign portfolio investors contributing the largest share at $250 million (47.1%).
Exporters and importers accounted for $180 million, while non-bank corporates contributed $70 million. Other sources, including foreign direct investment inflows, made up $20 million.
Meanwhile, the parallel market remained stable at N1,400/US$1, with a narrow premium of 1.82% over the official rate, signalling improved market alignment.
What’s Being Said
According to analysts at Coronation Merchant Bank, the naira is expected to trade within a narrow band in the near term, supported by ongoing liquidity management measures by the CBN.
“Liquidity mop-ups through Open Market Operations (OMO) continue to attract foreign portfolio investors seeking high-yield instruments,” the bank noted.
With bond yields rising to 15.94% ahead of a planned N700 billion auction, analysts expect renewed foreign inflows to support FX supply.
What’s Next
Despite the positive outlook, risks remain. Analysts warn that declining external reserves could constrain the CBN’s intervention capacity, while elevated oil prices may contribute to inflationary pressures through higher energy costs.
Any slowdown in foreign portfolio inflows or further reserve depletion could widen the gap between official and parallel market rates.
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