The Central Bank of Nigeria has taken decisive action to support the national currency, injecting $50 million into the foreign exchange market through authorized dealers. This intervention comes as the naira faces renewed pressure from surging dollar demand across both official and parallel markets.
Naira Under Pressure Across Market Segments
Market data reveals the naira experienced significant depreciation during the past week, with the official exchange rate declining by 0.41 percent to close at N1,442.43 per dollar. The parallel market recorded an even steeper fall of 1.49 percent, ending the week at approximately N1,472 per dollar.
Financial experts attribute this volatility to increased demand from importers and individuals seeking foreign currency for business operations, international education, and travel requirements. The situation was further complicated by global market conditions where the dollar strengthened following the reopening of the US government, which boosted investor confidence in American assets.
External Reserves Show Modest Improvement
Despite the currency pressures, Nigeria's external reserves demonstrated resilience, increasing by 0.18 percent to $43.43 billion from $43.35 billion. Economic analysts credit this growth to consistent oil receipts, higher non-oil inflows, and a sustained trade surplus that has provided the CBN with additional ammunition to defend the naira.
The timing of the CBN's intervention proved crucial as global oil prices climbed due to escalating geopolitical tensions. Fresh Ukrainian drone attacks on Russia's Novorossiysk export hub raised concerns about potential supply disruptions, pushing West Texas Intermediate crude to $60.28 per barrel and Brent crude to $64.54.
Analysts Project Near-Term Stability
Financial market experts maintain a cautiously optimistic outlook for the naira's performance in the coming weeks. Analysts at Cowry Asset believe that firmer reserves combined with a more structured market approach could help the currency trade with greater stability.
Cordros Capital analysts echo this positive sentiment, projecting improved foreign exchange liquidity, rising non-oil exports, and strengthened investor confidence to drive much-needed inflows into the Nigerian economy. They note that Nigeria's recent Eurobond issuance has already alleviated supply concerns and bolstered market sentiment.
The analysts further suggest that a global shift toward risk aversion, which typically strengthens safe-haven currencies like the Japanese yen and Swiss franc, could potentially weaken the US dollar and improve demand for emerging market currencies including the naira.
While acknowledging persistent risks, market watchers agree that stronger reserves, steady inflows, and supportive global monetary conditions could provide the naira with necessary breathing space in the short term, offering relief to businesses and individuals grappling with currency volatility.
