Despite significant efforts by the Central Bank of Nigeria (CBN) to defend the naira, the local currency weakened further in March, dropping by 2.6% in the parallel market and 2.4% at the official Nigerian Autonomous Foreign Exchange Market (NAFEM).
The naira closed the month at N1,536.82/$ in the official window and N1,530/$ in the parallel market, according to data from Afrinvest’s Monthly Market Report. Despite a hefty $668.8 million injected by the CBN into the foreign exchange market during the month, the currency continued to face strong demand pressure, particularly from foreign investors and local corporations.
AIICO Capital confirmed the persistent pressure in its own monthly report, noting that the naira’s value eroded nearly 3% month-on-month, opening March at N1,492.49/$ and closing at N1,536.82/$.
Supply Interventions, But Demand Outpaces
Mid-month, the CBN’s interventions did lead to a slight improvement in liquidity. However, demand consistently outstripped supply. The last week of March saw continued dollar sales by the CBN, including a $197.71 million injection into the FX market on April 4. Despite this, the naira hovered near N1,570/$ due to offshore demand spikes and weakened oil prices.
In a statement issued by Omolara Duke, Director of CBN’s Financial Markets Department, the apex bank reaffirmed its commitment to maintaining adequate liquidity and a stable FX market, while also urging dealers to comply with the Nigeria FX Market Code.
External Reserves, Trade Concerns Add Pressure
Nigeria’s foreign reserves also took a hit during the month, falling by $110 million to $38.31 billion. By the first week of April, reserves had further dipped to $38.15 billion, reflecting the strain from consistent CBN interventions and lower crude oil revenues.
Adding to the naira’s woes was the end of the naira-for-crude initiative, which previously helped reduce demand for dollars by allowing crude-for-products swaps. Analysts at Afrinvest warned that the termination of this initiative could further squeeze the FX market, as petroleum marketers and refineries return to the open market to source dollars for imports.
Geopolitical Risks and Oil Market Impact
Analysts at CardinalStone highlighted global risk aversion, spurred by rising tariffs in the U.S. under President Donald Trump, as another critical factor. They noted that foreign investors are fleeing to safer markets, leaving emerging economies like Nigeria vulnerable to capital flight and currency pressure.
Lower oil production and falling oil prices have only worsened the situation. Nigeria’s crude output slipped to 1.67 million barrels per day in February, down from 1.74 mbpd in January. With oil prices down 14.2% year-to-date, analysts fear the government could miss its revenue targets, putting additional pressure on the naira.
Former Zenith Bank Chief Economist, Marcel Okeke, warned that the global tariff war could spark a wave of imported inflation in Nigeria. “Given our dependence on imports, the naira’s decline could push up the cost of goods significantly,” he said.
Outlook: More Volatility Ahead?
While the CBN is expected to continue its liquidity support in the near term, the consensus among analysts is that global market conditions, domestic fiscal pressures, and rising FX demand may keep the naira under pressure in the coming weeks.
Unless oil prices rebound or foreign investment flows return, Nigeria’s currency may continue to face headwinds despite the central bank’s best efforts.
