Market News

By Ogaga Ariemu

The naira ended the week on a weaker note across segments of the foreign exchange (FX) market as renewed demand for dollars mounted, driven in part by global risk aversion following escalating tensions involving the United States, Israel and Iran.

Data from the Central Bank of Nigeria (CBN) showed that the naira depreciated by N29.87 week-on-week at the Nigerian Foreign Exchange Market (NFEM), with the dollar quoted at N1,393.26 on Friday compared with N1,363.39 recorded on Friday last week. This represents a 2.14 per cent depreciation for the local currency over the period.

On a day-on-day basis, the naira weakened by N5.81 or 0.4 per cent from N1,387.45 per dollar recorded at the close of trading on Thursday.

Across the five trading sessions of the week, the currency recorded a cumulative loss of N15.24 or 1.0 per cent from N1,378.02 quoted on Monday, the first trading day of the week at the NFEM.

In the parallel market, commonly referred to as the black market, the naira also came under pressure against the dollar during the week under review. By Friday morning, the currency traded at N1,425 per dollar compared with N1,420 quoted on Thursday, marking a loss of N5, before closing at N1,420 per dollar the same day.

On a week-on-week basis, the local currency depreciated by N50 to close at N1,420 per dollar on Friday compared with N1,370 recorded on Friday last week, representing a 3.5 per cent decline in the black market.

The spread between the official and parallel market exchange rates narrowed slightly to N27 on Friday compared with N33 recorded the previous day. In percentage terms, the gap moderated to about 1.94 per cent from 2.38 per cent on Thursday.

Market participants attributed the renewed pressure on the naira partly to the strengthening of the US dollar globally amid geopolitical tensions in the Middle East, which has triggered a flight to safety by investors.

“Yes, it is partially caused by that. Right now the dollar is strengthening against most major currency pairs as investors move into safe-haven assets. People are investing more in the dollar because they see it as the safest bet during periods of global uncertainty,” a market participant said.

The geopolitical tensions have also pushed up global crude oil prices sharply. In less than a week, the cost of oil has risen by about $20 per barrel to around $94, adding to global economic uncertainty and inflation concerns, according to foreign media reports.

Market analysts, however, noted that global factors are only part of the explanation for the pressure on the local currency, pointing to tight liquidity conditions in Nigeria’s foreign exchange market as another key driver.

“But the other part of it is liquidity,” the trader added. “There is limited liquidity even in the official market, and that situation tends to spill over into the parallel market. You also know that the parallel market is not regulated.”

Analysts say the naira may remain under pressure in the near term if global risk aversion persists and foreign exchange liquidity tightens further in the domestic market. They note that while higher oil prices could support Nigeria’s export earnings, sustained demand for dollars by importers and investors may continue to test the Central Bank’s efforts to stabilise the currency.

Before the latest depreciation, the naira had maintained a steady appreciation trend in recent weeks before the rally began to cool after the Central Bank of Nigeria stepped into the market to mop up excess dollar supply. The intervention was aimed at moderating the pace of the currency’s strengthening and preventing sharp swings that could distort investor positioning.

Analysts at the Financial Markets Dealers Association (FMDA) noted that despite the Central Bank’s late-month foreign exchange purchases intended to prevent excessive naira strengthening, the currency still recorded gains across both the official NFEM window and the parallel market in February 2026.

As part of its broader reserve diversification strategy, the CBN on Wednesday confirmed that it had taken delivery of responsibly sourced gold refined to London Bullion Market Association Good Delivery standards into Nigeria’s foreign reserves. The move brings the apex bank’s total gold holdings to about $3.5 billion.

The Central Bank also disclosed that the country’s gross external reserves have risen to $50.45 billion, strengthening confidence in Nigeria’s foreign exchange buffers and signalling improved liquidity conditions.

Olayemi Cardoso, governor of the CBN, disclosed the development at the end of the 304th Monetary Policy Committee meeting held in Abuja. He said the current level of reserves is sufficient to provide about 9.68 months of import cover, offering a stronger cushion against potential external shocks.

Cardoso attributed the accretion in reserves to stronger export earnings and rising remittance inflows, which he said have helped improve foreign exchange liquidity while supporting renewed investor confidence. Analysts say the higher reserve buffer could provide the central bank with additional firepower to stabilise the naira if volatility in global markets persists.