The Nigerian naira experienced mixed movements across foreign exchange segments on Friday, reflecting ongoing market pressure despite short-term gains in the informal window. In the parallel market, the currency appreciated slightly to N1,380 per dollar from N1,390 a day earlier, indicating improved dollar supply at the retail level. Currency traders attribute such movements to intermittent inflows from diaspora remittances and reduced speculative demand.
Parallel Market Gains as Official Rate Weakens
Data from the Central Bank of Nigeria showed that the naira weakened at the Nigerian Foreign Exchange Market (NFEM), closing at N1,358.66 per dollar compared to N1,354.20 on Thursday. This represents a depreciation of N4.46 based on the regulator's indicative exchange rate, which reflects transactions among authorized dealers and institutional players. As a result, the spread between official and parallel market rates narrowed significantly to N21.34 per dollar, down from N40.80 in the previous session, indicating temporary convergence.
Decline in FX Market Activity Raises Concerns
Despite modest improvement in the parallel market, trading activity in the official window weakened notably during the week. The volume of deals in the interbank foreign exchange market dropped by 41.7 percent to 346 transactions, down from 594 deals the preceding week. Similarly, turnover fell sharply by 49.5 percent to N248.44 million, compared to N492.57 million earlier, highlighting reduced liquidity and lower participation. Analysts say such declines may reflect cautious trading behavior among investors and banks amid uncertainty around foreign exchange inflows.
On a weekly basis, the naira depreciated by N9.66 in the official market, underscoring persistent pressure from limited dollar supply, even as it gained N7 in the parallel segment. Market analysts at Cowry Asset Management Plc noted that the naira's near-term outlook remains tied to policy actions and liquidity conditions. They stated: "While recent gains suggest some short-term stability, persistent pressure from external debt obligations, weak oil revenue accretion, and foreign portfolio outflows may limit sustained appreciation."
African Currencies Tipped to Extend Gains
Meanwhile, the naira is among several African currencies expected to strengthen further against the US dollar in the coming days. Other currencies projected to appreciate include Zambia's kwacha, supported by improving macroeconomic conditions and strong copper prices. While currencies in Kenya and Uganda are expected to remain stable, Ghana's cedi may weaken further due to sustained dollar demand from the energy sector.
