By Boluwatife Oshadiya
Key Points
- The naira depreciated across both the official and parallel foreign exchange markets amid rising demand for dollars for offshore payments and business settlements.
- The official exchange rate weakened to N1,373 per dollar, while the parallel market rate fell to N1,395 per dollar.
- FX turnover at the official market declined significantly to $51.17 million from $78.15 million recorded at the previous session.
- Nigeria’s external reserves dropped slightly to $48.33 billion, according to Central Bank of Nigeria data.
- Analysts expect the naira to remain relatively stable in the near term, supported by sustained CBN interventions and improved foreign inflows.
Main Story
The Nigerian naira depreciated across major foreign exchange markets as mounting demand for dollars for offshore transactions and corporate settlements continued to pressure liquidity conditions.
Data released by the Central Bank of Nigeria (CBN) showed that the intraday exchange rate weakened to as low as N1,375 per dollar, while the strongest quoted rate for the session settled at N1,367 per dollar.
At the official Nigerian Foreign Exchange Market (NFEM) window, the local currency closed at N1,373 per dollar, reflecting a weaker performance compared to previous trading sessions.
Market turnover also declined sharply, with total interbank FX transactions falling to $51.17 million across 67 deals, down from $78.15 million recorded at the close of trading before the weekend.
The parallel market also reflected increased pressure on the local currency, with the naira depreciating to N1,395 per dollar amid persistent scarcity of dollar liquidity in the informal market segment.
As a result, the spread between the official and parallel market exchange rates narrowed to N21.84 per dollar from N32.61 per dollar recorded previously.
Despite the latest depreciation, the naira had posted gains in the preceding week after reversing earlier losses. At the official market, the currency appreciated by 1 percent week-on-week to close at N1,361.40 per dollar.
The naira had opened the previous week around N1,365.25 per dollar before strengthening to an intraweek high of approximately N1,355.85 per dollar.
Meanwhile, activity at the parallel market remained relatively unchanged on a weekly basis, with the currency closing flat at N1,400 per dollar.
Consequently, the premium between both market segments narrowed slightly to 2.84 percent, equivalent to N38.61 per dollar.
Further data from the apex bank showed that Nigeria’s gross external reserves declined marginally by $38.11 million to $48.33 billion.
The development comes as the CBN continues efforts to stabilise the foreign exchange market through periodic interventions, tighter monetary policy measures and reforms targeted at improving transparency and liquidity within the market.
The apex bank has also sustained efforts to clear outstanding FX obligations, improve diaspora remittance inflows and attract foreign portfolio investors into the Nigerian economy.
What’s Being Said
Foreign exchange analysts said the naira is expected to trade within a relatively stable range in the short term despite persistent demand pressures.
Analysts attributed the expected stability to continued interventions by the CBN, improved foreign portfolio investment inflows and ongoing market reforms aimed at enhancing liquidity and investor confidence in the foreign exchange market.
Market participants also noted that global oil price movements and Nigeria’s external reserve position would remain key factors influencing the direction of the naira in the coming weeks.
What’s Next
Investors and market participants are expected to closely monitor the CBN’s next policy actions, including possible FX interventions and liquidity management measures.
Attention will also remain on Nigeria’s external reserve performance, crude oil earnings and foreign capital inflows, all of which are critical to sustaining exchange rate stability.
Analysts expect the apex bank to maintain a tight monetary stance as part of broader efforts to curb inflationary pressures and defend the local currency.
Bottom Line
The naira remains under pressure from elevated dollar demand and declining market liquidity, although ongoing CBN interventions and improving investor sentiment continue to provide some support for exchange rate stability.
