Market News

By : Helen Oji

The naira depreciated by 1.09 per cent against the dollar at the official foreign exchange (FX) market last week, closing at N1,358.44/$, as mounting demand pressures, sustained market interventions by the Central Bank of Nigeria (CBN) and weakening reserve buffers combined to raise concerns about the stability of the local currency.

The depreciation came as Nigeria’s external reserves slipped by 0.29 per cent to $48.48 billion, reflecting the continued strain on the country’s FX position.

At the parallel market, the naira also weakened marginally, shedding one basis point to settle around N1.370/$, further highlighting the broad-based nature of the currency pressure across market segments.

The movement is an indication of persistent liquidity constraints in the market despite ongoing policy measures aimed at stabilising the exchange rate and improving market confidence.

Analysts attributed the decline in the naira to sustained demand for foreign currency from importers, manufacturers and investors, as well as the continued intervention deployed by the apex bank to support market liquidity.

These interventions, while providing short-term relief, have contributed to the drawdown in external reserves, which remain under pressure from multiple fronts.

The decline in reserves to $48.48 billion comes at a time when Nigeria is grappling with broader macroeconomic vulnerabilities, including inflationary pressures, elevated import costs and investor concerns over reform sustainability.

Operators argued that the shrinking reserve base raises questions about the sustainability of current currency support measures if inflow conditions fail to improve.

In the international oil market, crude prices extended their gains for a fifth consecutive session, supported by geopolitical tensions and tightening global supply dynamics.

Looking ahead, research analyst at Cowry Asset Management Limited, Charles Abuedu, said the naira is expected to remain under near-term pressure as persistent FX demand, sustained intervention by the CBN and weakening reserve buffers continue to weigh on the local currency.

He noted that the strain on reserves is being amplified by rising debt servicing commitments and softer external inflows, factors that are limiting the country’s ability to maintain a stronger foreign exchange position.

According to him, elevated global crude oil prices could offer some relief to Nigeria’s external account if they translate into stronger export earnings and improved dollar inflows.

The analyst added that overall market stability in the coming weeks will depend on the pace of foreign exchange inflows, the strength of oil revenue performance, and the extent to which capital flows normalise across the economy.