The naira weakened slightly against the dollar last week, declining by 0.7 percent in the official foreign exchange market to close at N1,371.04 per dollar. The local currency also depreciated in the parallel market, shedding about 36 basis points to close at N1,370.13 per dollar, thereby closing the market arbitrage gap.
Impact on Businesses and Economy
The depreciation comes at a time when businesses and manufacturers continue to grapple with high import costs, elevated production expenses, and limited access to foreign exchange. Analysts said these factors are worsening inflationary pressures and weakening investor confidence in the broader economy.
External Reserves and FX Supply
Although Nigeria's external reserves recorded a marginal increase of 0.19 percent to $48.54 billion in the week, analysts said the improvement remains insufficient to significantly strengthen market liquidity or ease pressure on the naira due to persistent demand for foreign exchange by importers, manufacturers, airlines, and other market participants. Financial analysts said the currency would continue to face structural challenges driven by inadequate dollar inflows, weak capital importation, declining foreign portfolio investment, and continued dependence on oil receipts for external earnings.
Global Oil Market Dynamics
In the global oil market, crude prices surged strongly during the week amid escalating geopolitical tensions involving Iran and growing concerns over possible supply disruptions in the Middle East. Brent crude was on track for a weekly gain of nearly six percent after comments by President Donald Trump signalled increasing impatience with Iran, despite reports that about 30 vessels had recently transited through the Strait of Hormuz, one of the world's most strategic oil shipping routes.
Crude Oil Price Movements
At the close of trading, Brent crude advanced by 3.24 percent to $109.2 per barrel, while the United States West Texas Intermediate gained 3.73 percent to settle at $104.9 per barrel. Nigeria's Bonny Light crude also posted strong gains, rising by 5.99 percent to close at $116.99 per barrel.
Analysts' Outlook
Analysts said the rise in crude oil prices offered temporary support for Nigeria's fiscal position and external reserves through improved export earnings and increased foreign exchange inflows. However, they warned that the gains remained highly vulnerable to geopolitical shocks, global demand uncertainties, and fluctuations in international energy markets. They added that despite stronger oil prices, the naira could remain under pressure in the near term because foreign exchange demand continued to outpace supply in the official market, while confidence in the currency remains weak.
Fixed-Income Market
Meanwhile, bearish sentiment persisted across Nigeria's fixed-income market as the secondary bond market extended its losses amid weak investor demand and increased selloffs across most maturities. Trading activity remained subdued throughout the week as investors adopted a cautious approach in response to inflation concerns, liquidity pressure, and uncertainty surrounding future monetary policy direction.
