The Nigerian Naira experienced a notable decline in value last week, dropping by N10 against the United States dollar in the official market. This depreciation coincided with a significant shift in the nation's external reserves, which recorded their first decline in over two months.
Market Pressure Weighs on Currency Value
According to recent data, the Naira settled at N1,464.50 per US dollar at the official Nigerian Foreign Exchange Market (NAFEM). The currency's weakness is attributed to sustained demand pressures at the foreign exchange window. Despite persistent interventions by the Central Bank of Nigeria (CBN) and inflows from foreign portfolio investments, demand continued to outstrip supply, pushing the currency lower.
In the parallel market, the situation was more pronounced. Reports from financial firms indicated that the Naira traded at a rate of N1,510 per dollar. Analysts at AIICO Capital noted in a weekly report that the Naira weakened by N10.09, representing a weekly decline of 0.69 percent. The currency traded within a range of N1,450 to N1,469.90 per dollar, with appreciation observed only on Tuesday of that week.
External Reserves Halt Upward Trajectory
In a related development, Nigeria's external reserves, which had been on a steady climb, reversed course. Data from the Central Bank of Nigeria shows that the reserves fell to $45.21 billion as of 17 December 2025. This marked the first decline since 8 October 2025, when reserves stood at $42.56 billion.
The decline began on 15 December, when reserves dropped to $45.32 billion from a previous level of $45.47 billion. The slide continued, falling to $45.27 billion before a further day-on-day reduction of $57.05 million brought the total to the $45.21 billion figure. This lowered the year-to-date gain in the reserves to 10.60%.
The past three months had shown consistent growth:
- Reserves closed September at $42.35 billion.
- They rose to $43.19 billion in October.
- By 28 November, they stood at $44.69 billion.
The reserves had first crossed the significant $45 billion threshold on 4 December 2025.
Mixed Outlook for the Naira in 2026
Looking ahead, projections for the Nigerian currency present a mixed picture. The CBN's November 2025 Business Expectations Survey offers a measure of optimism. The survey indicated that the Naira index could rise from 28.8 points to 42.2 points by May 2026, signaling potential stability and a gradual strengthening in the currency market over the next six months.
However, a contrasting and more cautious view comes from international analysis. David Cowan, an African economist at Citibank, presented a note to clients projecting that the Naira could weaken to between N1,650 and N1,700 per dollar by mid-2026. This forecast is based on expected pressure from lower crude oil prices and the onset of a new monetary easing cycle.
The performance of the Naira in both official and unofficial markets will continue to be a key indicator of Nigeria's economic health, closely watched by businesses, investors, and policymakers alike.
