The Central Bank of Nigeria (CBN) has launched a significant offensive to stabilise the national currency, injecting a substantial $250 million into the foreign exchange market over five trading sessions. This decisive move aims to counter renewed volatility and mounting year-end demand for the US dollar, forming a key part of the apex bank's strategy to steady the naira ahead of its 2026 policy objectives.
Naira Weathers Initial Pressure Before Rebound
Despite the CBN's aggressive dollar sales directly to banks and authorised dealers, the naira initially faced intense pressure. The spot exchange rate climbed to a weekly peak of N1,456 per dollar, driven by a rush from importers, corporations, and other users seeking foreign currency. However, the sustained intervention eventually filtered through the system, prompting a late rebound. The increased dollar supply helped narrow liquidity gaps, curb panic buying, and prevented a steeper depreciation, though the naira still closed the week N3.98 weaker against the greenback.
Financial experts highlight that the $250 million injection served more as a stabilising force than a catalyst for a major rally. By boosting liquidity, the CBN managed to slow the pace of the naira's decline and anchor it within a tighter trading range. Additional inflows from foreign portfolio investors and exporters provided further support, easing the overall demand pressure on the market.
Robust External Reserves Provide Critical Backing
Underpinning the CBN's capacity to intervene is the consistent growth in Nigeria's external reserves. Data reveals that gross FX reserves have increased for the twenty-fifth consecutive week, rising by $396.84 million to reach $45.44 billion—a six-year high. This expanding reserve buffer offers the central bank, under Governor Olayemi Cardoso, greater firepower to smooth out market volatility without immediately sparking concerns over reserve adequacy.
Market analysts view this steady accumulation as a vital confidence signal to investors, demonstrating that the monetary authority possesses the resources to defend the naira when necessary. The robust reserves position strengthens the CBN's hand in managing exchange rate fluctuations.
Global Markets Present Mixed Signals for Nigeria
While the CBN battles domestic FX pressures, global commodity markets sent conflicting cues. Oil prices, a crucial source of Nigeria's dollar earnings, recorded a 4 percent weekly decline. Brent crude settled at $61.12 per barrel, weighed down by fears of a supply glut and potential peace talks in the Russia-Ukraine conflict.
In contrast, gold prices surged to a one-month high, benefiting from a weakened US dollar following a Federal Reserve rate cut. Spot gold rose by 2.51 percent to $4,302.43 per ounce, highlighting a shift towards safe-haven assets among international investors.
Market Outlook Hinges on Sustained Inflows and Discipline
The near-term outlook for the naira remains cautious, with analysts predicting continued sensitivity to dollar demand trends and further actions from the CBN. While the $250 million intervention has provided temporary calm, experts argue that lasting stability will depend on several factors:
- Consistent foreign exchange inflows from various sources.
- Disciplined management of dollar demand.
- Supportive conditions in the global economic environment.
The CBN's bold move sends an unequivocal message to the market: the naira will not be left to drift unchecked. This intervention follows a prior report of the bank selling $150 million to authorised dealers in a similar effort to improve dollar liquidity and ease pressure on the local currency.
