Market News

By : Helen Oji

The naira recorded a mild depreciation against the dollar last week, slipping by 0.32 per cent week-on-week to close at N1,375.46/$ in the official market.

This came even as the external reserves inched higher to $48.72 billion, indicating a complex mix of sustained foreign exchange (FX) demand pressures and modest reserve accretion.

In the parallel market, the currency also weakened slightly by 15 basis points to N1,370/$, indicating a broad alignment between both segments of the FX market despite lingering liquidity constraints.

The movement in the FX market underscores the continued tension between demand-side pressure and policy-driven attempts to stabilise the naira.

While recent monetary tightening measures by the Central Bank of Nigeria (CBN) have helped to moderate extreme volatility, market participants are struggling to navigate a landscape shaped by intermittent dollar inflows, import-related demand and shifting investor sentiment.

The marginal improvement in external reserves to $48.72 billion, though modest at 0.05 per cent week-on-week, offers some reassurance of underlying external sector stability and provides a buffer that could help support the currency in the near term.

Nigeria’s Bonny Light crude declined by 5.99 per cent to $116.92 per barrel.

The drop highlights the impact of grade-specific pricing dynamics and differentiated demand conditions in the international crude market, even amid broader gains in global oil benchmarks.

Looking ahead, analysts expect the naira to remain under mild pressure in the near term, driven by persistent foreign exchange demand and structural liquidity constraints in the domestic FX market.

However, the gradual build-up in external reserves is expected to provide some cushioning effect, helping to dampen sharp volatility even as broader macroeconomic uncertainties continue to shape market direction.

Also, the Nigerian secondary bond market traded on a bearish note throughout the week, reflecting sustained pressure from weak investor demand and widespread selloffs across most maturities following the Central Bank of Nigeria’s Monetary Policy Committee (MPC) decision to maintain its current policy stance.

As a result of the cautious trading environment and subdued appetite for fixed-income instruments, average yields in the secondary market rose by 17 basis points week-on-week to close at 16.28 per cent, underscoring tightening sentiment across the domestic debt space.

Market activity remained largely muted throughout the week as investors adopted a defensive positioning strategy in response to elevated interest rates and persistent liquidity constraints in the financial system. The combination of restrictive monetary conditions and uncertainty around near-term policy direction continued to weigh on demand, particularly for longer-dated instruments, as participants sought higher compensation for perceived risk.