Nigeria's naira depreciated by 0.20% against the US dollar on Monday, June 30, 2026, as growing demand for dollars and reduced foreign portfolio inflows intensified pressure on the currency. Data from the Central Bank of Nigeria (CBN) showed the naira closed at N1,383.6262 per dollar at the Nigerian Foreign Exchange Market (NFEM), down from N1,380.9329 at the end of the previous week.
Dollar Demand Intensifies Despite Higher Market Liquidity
According to the CBN's daily FX report, transactions at the official market were executed within a range of N1,377.50 to N1,390 per dollar, as demand for foreign currency continued to outpace supply. Although trading activity improved significantly, the stronger liquidity failed to halt the naira's decline. Interbank turnover at the NFEM surged by more than 80% to $223.94 million on Monday, from $124.22 million recorded on Friday. The sharp increase suggests commercial banks processed more international payment requests for customers, even as hard currency shortages continued to weigh on the market.
Market analysts said the absence of fresh CBN intervention means pressure on the naira is likely to persist, particularly as foreign exchange inflows into the official window remain subdued.
Foreign Investors Pull Back from Nigerian Assets
Analysts attributed the growing pressure on the naira to weakening foreign portfolio investment, driven partly by expectations that the US Federal Reserve will maintain a hawkish monetary policy stance. Higher US interest rates typically make emerging market assets less attractive, prompting investors to move capital into safer dollar-denominated investments. Economists also pointed to increasing political uncertainty ahead of Nigeria's 2027 elections, which is encouraging a flight to safety among foreign investors.
The cautious sentiment has spilled into the Nigerian stock market, where investors are increasingly concerned that pre-election spending could fuel inflation and keep interest rates elevated for longer.
Foreign Portfolio Investment Continues to Decline
Recent data from the Nigerian Exchange (NGX) showed that foreign portfolio investment (FPI) fell for the second consecutive month in May 2026. FPI transactions dropped 25.9% month-on-month to N183.6 billion ($133.7 million) from N247.8 billion ($180.2 million) in April, accounting for just 9.5% of total market turnover, down from 13.7% previously. Despite the decline in foreign participation, overall market activity remained strong. Total turnover increased to N1.9 trillion ($1.4 billion) in May, supported by robust domestic investor participation. Domestic transactions rose 13.2% to N1.8 trillion, representing 90.5% of total market activity.
Outlook and Potential Catalysts
Looking ahead, CSL Stockbrokers Limited expects investor sentiment to improve on the back of Nigeria's anticipated reclassification into the FTSE Russell Frontier Market Index by September 2026 and the potential listing of Dangote Refinery on the Nigerian Exchange. These developments could help attract fresh foreign capital in the months ahead. Meanwhile, the naira has shown mixed performance across markets, with an appreciation of N5.74 in the official window recently. As the CBN continues to implement reforms aimed at enhancing transparency, the implications of these developments could significantly impact Nigeria's economic landscape and foreign exchange stability.
