Market News

The Central Bank of Nigeria (CBN) showed that the last time the dollar traded above the N1,380 level was on April 7, 2026, when it closed at N1,386.66. Compared with its strongest level this year, the naira has depreciated by N42.28, or 3.06 percent, from N1,341.35 recorded on February 19, 2026, to N1,383.63 on Monday at the Nigerian Foreign Exchange Market (NFEM). On a day-on-day basis, the local currency weakened slightly by N2.70 from N1,380.93 quoted on Friday.

A currency trader, who spoke on condition of anonymity, attributed the renewed pressure on the naira to elevated demand for the dollar from investors. The depreciation comes even as the CBN has stayed out of the FX market for seven consecutive weeks without selling dollars, according to a report by Coronation Research.

Despite the weakening exchange rate, market activity remained strong. Total turnover at the NFEM window surged to $910.78 million on Monday, representing a 108.37 percent increase from $437.09 million recorded on Friday. The number of deals also increased by 26.42 percent to 378 from 299 transactions over the same period.

According to Coronation Merchant Bank, total FX inflows for last week stood at $0.69 billion, with foreign portfolio investors (FPIs) accounting for the largest share of 50.93 percent, or $0.36 billion. Exporters and importers contributed 29.26 percent, equivalent to $0.20 billion, while non-bank corporates accounted for 10.34 percent, or $0.07 billion. Equity investment FPIs contributed 5.75 percent, or $0.04 billion, while other sources made up the remaining 3.42 percent. Notably, there were no FX inflows from the CBN for the seventh consecutive week, underscoring the increasing role of autonomous sources in supporting market liquidity.

Looking ahead, analysts at Coronation said they expect the naira to trade within a relatively narrow range, with any future interventions by the CBN helping to cushion pressure arising from sustained demand for foreign exchange.

The International Monetary Fund (IMF), in its latest Article IV Consultation report on Nigeria, acknowledged that foreign exchange interventions may be justified during periods of market stress, particularly given the relative shallowness of Nigeria’s FX market and the economy’s exposure to volatile capital flows. However, the Fund stressed that such interventions should not replace necessary macroeconomic policy adjustments.

Nigeria’s external reserves, which provide the CBN with the capacity to support the naira and meet external obligations, have continued to strengthen. Data published on the CBN’s website showed that reserves rose to $51.43 billion as of June 29, 2026, representing a 38.22 percent increase from the corresponding period a year earlier.

The growth in reserves has been supported by stronger export earnings, driven by increased crude oil production and still-elevated global oil prices.

Analysts at Quest Merchant Bank also attributed the stronger reserve position to resilient foreign portfolio investment inflows despite subdued global risk sentiment arising from the Middle East conflict. According to the bank, Nigeria’s attractive carry-trade opportunities continue to draw offshore investors, with stop rates at the latest Open Market Operations (OMO) auction averaging 20.13 percent for the 110-day and 138-day tenors.

Following the month-on-month increase in reserves in May 2026, import cover stood at 13.8 months of merchandise imports and 9.5 months when imported services are included. Against the backdrop of the improved reserve position, the naira appreciated by 0.2 percent month-on-month in the official market to N1,372.00 per dollar and by 0.6 percent in the parallel market to N1,390 per dollar.

Across other major African economies, reserve trends remained mixed. In South Africa, the international liquidity position, a broader measure of reserves, declined by $29 million month-on-month to $73.5 billion due to lower gold valuation gains and higher external foreign exchange obligations. By contrast, Egypt’s net international reserves rose by $125 million month-on-month to $53.1 billion in May, supported by elevated domestic interest rates that continued to attract foreign exchange inflows.

Looking ahead, Quest Merchant Bank expects Nigeria’s external reserves to continue rising, supported by stronger export receipts amid elevated global oil prices and sustained offshore capital inflows driven by attractive domestic yields.

Meanwhile, the IMF has endorsed Nigeria’s plan to dismantle the remaining foreign exchange restrictions as market conditions improve, describing the move as an important step toward restoring normal market functioning and strengthening investor confidence.

The Fund welcomed the CBN’s decision to remove one of the country’s capital flow management measures earlier this year and encouraged the authorities to continue gradually eliminating the remaining restrictions as foreign exchange pressures ease.

“Staff welcomes that, in March 2026, the capital flow management measure on the requirement for International Oil Companies to hold 50 percent of repatriated export proceeds in Nigeria for 90 days before transferring offshore has been eliminated,” the IMF said.

The endorsement comes as Nigeria’s foreign exchange market continues to stabilise following a series of reforms introduced since 2023, including the transition to a more market-determined exchange rate regime.

According to the IMF, Nigeria’s external position strengthened significantly in 2025, supported by higher oil and gas exports, lower imports of refined petroleum products and stronger diaspora remittance inflows.

The Fund noted that improved foreign exchange inflows and more stable market conditions have created an opportunity for the authorities to unwind measures that were introduced during periods of severe FX pressure and market volatility.

The CBN has indicated its intention to phase out three remaining capital flow management measures. These include the prohibition on purchasing foreign exchange in Nigeria for investment in foreign currency-denominated securities abroad, limits on overseas transactions using naira-denominated debit and credit cards, and the net open position requirement that restricts banks’ foreign exchange exposure.

According to the IMF, these measures should be removed as macroeconomic and financial conditions continue to improve.

“In line with the Fund’s Institutional View, these capital flow management measures should be phased out as foreign exchange pressures abate and macroeconomic and financial stability is restored,” the report said.