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The Central Bank of Nigeria (CBN) withdrew N1.7 trillion from the financial system in March 2025 through Open Market Operations (OMO) auctions, a move aimed at curbing rising prices and stabilising foreign exchange (FX) volatility, according to a report by Afrinvest Research. However, only the mid- and long-dated instruments received subscriptions during both auction rounds.

Despite the liquidity tightening measures, the naira depreciated by 2.4% and 2.6% month-on-month against the US dollar, closing at N1,536.82/$1.00 and N1,530.00/$1.00 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window and the parallel market, respectively. Meanwhile, Nigeria’s external reserves declined slightly by 0.2% in March, ending the month at $38.3 billion.

On a daily trading basis, the local currency depreciated by N5 as the dollar was quoted at N1,565 on Friday as against N1,560 quoted on the previous day, in the black market.

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The naira suffered a sharp depreciation against the dollar in the official FX market on Thursday, a day after United States President Donald Trump announced a 10% increase in global trade tariffs.

Following Thursday’s trading session, the naira fell by N20.75 or 1.3% as the dollar was quoted at N1,552.53 compared to N1,531.25 on Wednesday, according to data from the CBN. In the parallel market, the naira also weakened, losing N5 to close at N1,560 from N1,555 on the previous day.

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Looking ahead, Afrinvest analysts anticipate a potential increase in global oil prices in April. This outlook is driven by Trump’s imposition of a 25.0% tariff on buyers of Venezuelan crude, which constitutes 1.3% of global supply, as well as mounting geopolitical tensions, including threats of military strikes on Iran over its nuclear program and possible sanctions on Russia if ongoing peace negotiations break down.

Despite this bullish projection for oil prices and a likely rebound in Nigeria’s domestic oil output, thanks to swift repairs on the vandalised 180,000 barrels per day Trans-Niger Pipeline (TNP), Afrinvest expects continued strain on Nigeria’s foreign exchange reserves.

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The report also pointed to the suspension of the Naira-for-Crude initiative as a factor that could further increase FX demand. With local refineries now joining the queue for FX and importers of Premium Motor Spirit (PMS) sourcing more products from international markets, the analysts forecast that the naira will remain under pressure in the near term, barring any major unexpected developments.

At the money market in March 2025, average system liquidity dropped by 43.9% month-on-month, falling from N1.3 trillion to N735.1 billion. The liquidity decline occurred despite higher inflows from primary market repayments (N4.1 trillion) and the Standing Lending Facility (SLF) at N16.5 trillion, which exceeded outflows from primary market sales (N3.1 trillion), the Standing Deposit Facility (SDF) at N5.2 trillion, and OMO sales totaling N1.7 trillion. Nevertheless, the Open Repo Rate (OPR) rose by 21 basis points, while the Overnight (OVN) rate declined by 83 basis points to settle at 27.0% and 26.8%, respectively.