The Nigerian naira continued its downward trend at the official foreign exchange window last week, closing at ₦1,536.89 per dollar on Friday. This marks a 1.25% decline from the previous week, despite the Central Bank of Nigeria’s (CBN) ongoing interventions to stabilize the currency.
Market Performance
According to CBN data, the naira opened the week at ₦1,528.03/$, weaker than the ₦1,517.93/$ recorded in the prior trading session. It depreciated further to ₦1,532.93/$ before briefly regaining some strength midweek. However, by Friday, it had fallen to its lowest level of the week.
Factors Behind the Depreciation
The latest decline comes amid stalled negotiations between the Nigerian National Petroleum Corporation Limited (NNPCL) and local refineries regarding the naira-for-crude exchange agreement. The ongoing discussions, set to resume this week, are crucial to determining the future of the arrangement, which has been a key factor in stabilizing foreign exchange demand.
Additionally, Dangote Petroleum Refinery’s decision to temporarily halt sales of petroleum products in naira has added further pressure on the FX market. With oil marketers now required to source dollars to purchase fuel, the demand for foreign currency has intensified, contributing to the naira’s depreciation.
CBN Interventions and Market Outlook
Despite CBN’s efforts to boost FX liquidity through increased dollar supply to banks and Bureau De Change (BDC) operators, analysts caution that these measures may only provide short-term relief. Without structural reforms, the naira is likely to remain under pressure.
Financial experts at Cowry Assets Management Limited anticipate continued volatility in the foreign exchange market as demand for the U.S. dollar remains high. However, they expect the CBN to sustain its interventions in an attempt to curb excessive depreciation.
In the parallel market, the naira appreciated slightly, gaining ₦12 against the dollar to close at an average of ₦1,568/$—a 0.77% improvement week-on-week.
External Reserves and Oil Market Impact
Nigeria’s foreign reserves recorded a 0.06% decline, falling from $38.37 billion to $38.35 billion as of Thursday. Analysts attribute this to CBN’s continued intervention in defending the naira amid low FX inflows.
Meanwhile, oil market fluctuations remain a significant factor in Nigeria’s FX outlook. Last week, Brent crude oil prices rose 3% to approximately $85 per barrel, driven by fresh U.S. sanctions on Iran and OPEC+ commitments to production cuts. As an oil-dependent economy, Nigeria’s FX reserves and naira stability remain tied to developments in the global energy market.
Future Implications
With persistent FX shortages and external economic pressures, the naira’s trajectory remains uncertain. Experts stress the need for policy consistency, increased foreign investment, and diversified revenue sources to achieve long-term stability in Nigeria’s currency market.
