Naira ends week softer at N1,368/$ despite CBN support

The naira ended the week weaker at N1,368.22 per dollar at the Nigerian Foreign Exchange Market (NFEM), despite sustained Central Bank of Nigeria (CBN) interventions and improved foreign exchange liquidity that kept the currency largely within the N1,360-N1,370/$ range.

The Friday close represented a N4.05, or 0.30 per cent, depreciation from the N1,364.17/$ level at which the currency opened the week, underscoring the continued tight trading range in the official market even as dollar demand resurfaced towards the end of the week.

The naira opened trading on Monday at N1,364.17/$ and weakened marginally to N1,365.12/$ on Tuesday before closing Wednesday at N1,365.38/$. It subsequently strengthened to about N1,360/$ on Thursday, its strongest level of the week, before reversing direction on Friday to N1,368.22/$.

The Friday close therefore represented an N8.22, or 0.60 per cent, depreciation from Thursday’s level, although the naira remained below the N1,400/$ psychological threshold.

The week’s performance points to a market in which CBN interventions and available dollar supply are helping to contain sharp swings, but where underlying demand pressures have not disappeared.

It was reported on Thursday that the naira was quoted at N1,360/$ in the official market, compared with N1,373/$ a week earlier, with traders attributing the currency’s resilience to continued CBN dollar sales.

By the end of the week, the gap between the official and parallel markets had narrowed significantly, with the street rate quoted at about N1,405/$ against the NFEM close of N1,368.22/$.

The difference of about N36.78 represented a premium of roughly 2.7 per cent over the official rate, a substantial improvement from the N65 gap recorded when the parallel-market rate stood at N1,425/$ against N1,360/$ on Thursday.

The narrowing spread is an important indicator for businesses and investors because it suggests that pricing in the two segments of the foreign exchange market is becoming more closely aligned, reducing some of the distortions associated with a wide official-to-parallel-market differential.

The official market itself recorded relatively limited movement throughout the week. From Monday’s N1,364.17/$ to Friday’s N1,368.22/$, the currency moved by only N4.05, or 0.30 per cent, despite changes in dollar demand and global currency sentiment.

The stability has been supported by the CBN’s continued participation in the foreign exchange market, including dollar sales to authorised dealers and Bureau de Change operators.

FMDQ describes the Nigerian Autonomous Foreign Exchange Market as the broader foreign exchange market where transactions are conducted by authorised dealers, clients and the CBN, with rates determined by prevailing market conditions.

Market analysts said the naira could remain within the N1,350-N1,375/$ range in the near term if foreign exchange supply remains adequate and the CBN continues to intervene when demand pressures intensify.

Nigeria’s external reserves, estimated at $52.5 billion, also provide a substantial buffer for the foreign exchange market, strengthening the CBN’s capacity to respond to temporary demand pressures and speculative activity.

However, maintaining the naira at current levels will depend on the sustainability of foreign exchange inflows and the apex bank’s willingness and capacity to continue supplying dollars to the market.

Oil receipts remain particularly important to the outlook because crude exports constitute a major source of Nigeria’s foreign exchange earnings. A sustained improvement in crude oil prices and production would strengthen dollar supply, while a reversal in oil prices could place fresh pressure on the naira.

The week’s currency performance also reflected movements in the global dollar market.

The US dollar index traded around 99.75 during Thursday’s European session as investors assessed uncertainty surrounding negotiations between Washington and Tehran. Safe-haven demand provided some support for the dollar as markets remained cautious over the outcome of the US-Iran discussions.

Analysts expect the naira to remain broadly range-bound in the short term, although a mild depreciatory bias could emerge over the medium term if domestic inflation remains significantly above US inflation and dollar demand continues to outpace supply.

The N1,420-N1,450/$ zone remains an important resistance area on the upside for the dollar, with a move towards that range potentially signalling renewed corporate demand for foreign exchange or a temporary liquidity squeeze.

Conversely, stronger foreign exchange inflows, sustained CBN intervention and improved investor demand for naira assets could keep the currency below the N1,400/$ threshold.

The week’s trading pattern therefore suggests that the naira has entered a period of relative stability rather than a definitive appreciation cycle. The currency has remained within a narrow band, the official-to-parallel-market gap has narrowed, and CBN intervention continues to cushion demand pressures.