Naira holds near N1,370 as CBN stays out of FX market

The naira traded within a narrow range last week despite a sharp decline in foreign exchange inflows, as stronger autonomous dollar supplies and rising external reserves helped cushion the impact of the Central Bank of Nigeria’s prolonged absence from the official market.

Data from the Nigerian Foreign Exchange Market (NFEM) showed that total dollar inflows declined by more than 26 per cent to $689 million, reflecting weaker liquidity conditions after the Central Bank of Nigeria refrained from supplying foreign exchange to the market for the sixth consecutive week.

Despite the drop in inflows, the naira depreciated only marginally by 0.48 per cent week-on-week to close at N1,370.46/$ at the official market, compared with N1,363.83/$ in the previous week, underscoring the growing role of autonomous foreign exchange sources in supporting market stability.

The local currency had opened the week on a stronger note, appreciating to N1,356.27/$ before surrendering gains as demand pressures resurfaced amid softer dollar supply.

At the parallel market, however, the naira strengthened by 0.36 per cent to N1,400/$ from N1,405/$ recorded in the preceding week, narrowing the gap between the official and unofficial markets.

The premium between both markets declined to 2.16 per cent from 3.02 per cent a week earlier, suggesting improved price convergence and increased confidence in the foreign exchange market.

Analysis of inflows showed that exporters emerged as the largest source of foreign exchange during the week, contributing $298.3 million, representing 43.3 per cent of total market inflows.

Foreign portfolio investors accounted for $270.5 million or 39.3 per cent of total inflows, highlighting sustained foreign investor interest in naira assets amid elevated domestic yields.

Non-bank corporates supplied $98.9 million, while other corporate entities contributed $12.9 million, with other sources accounting for the balance.

Notably, the CBN made no foreign exchange intervention for the sixth straight week, signalling the apex bank’s growing confidence in market-driven liquidity and ongoing foreign exchange reforms.

The development comes as Nigeria’s external reserves climbed to $51.04 billion as of June 18, representing the country’s highest reserve level in about 17 years.

The reserves increased by $529.71 million during the week, providing stronger external buffers and reinforcing the CBN’s ability to support exchange rate stability if necessary.

The combination of rising reserves and stable exchange rates suggests that recent foreign exchange reforms are gradually improving market confidence and reducing dependence on central bank interventions.

The stronger reserve position also provides additional support for the naira at a time when global financial markets remain volatile, and emerging economies continue to face external pressures.

Analysts at Coronation Research said the naira is expected to remain broadly stable in the near term, supported by robust autonomous inflows, improved foreign portfolio investment and stronger external reserves.

The performance of the naira during the week indicates that Nigeria’s foreign exchange market is increasingly relying on market-driven sources of liquidity, even as the apex bank maintains a cautious stance on direct interventions.

With external reserves now above $51 billion and the gap between official and parallel market rates narrowing further, analysts believe the naira may continue to trade within a relatively stable range, provided foreign inflows remain resilient and global oil prices remain supportive.