Naira slips to N1,329.86 as FX turnover plunges 66%

The naira weakened marginally against the US dollar on Wednesday even as activity in Nigeria’s official foreign exchange market contracted sharply, highlighting a quieter trading environment despite the currency’s recent stability and stronger external reserves.

The naira depreciated by 0.05 per cent to close at N1,329.86 to the dollar at the Nigerian Foreign Exchange Market (NFEM), according to Central Bank of Nigeria (CBN) data.

Transactions were executed within a narrow range of N1,328 to N1,331.50 per dollar, indicating limited movement in the exchange rate during the session.

The bigger development was the sharp fall in market activity. Interbank FX turnover dropped by about 66 per cent to $89.36 million from $262.10 million recorded in the previous session, reflecting a significant reduction in dollar transactions among market participants.

The lower turnover comes against a backdrop of improving external balances, with Nigeria’s gross foreign exchange reserves climbing above $54.6 billion.

The larger reserve buffer has strengthened the country’s capacity to absorb external shocks and provides the CBN with greater room to manage temporary pressure in the foreign exchange market.

Market analysts at Broadstreet maintained a positive outlook for the naira, pointing to the continued increase in reserves and stronger foreign exchange inflows.

The external position is also benefiting from elevated crude oil prices. Brent crude remained above $107 a barrel on Wednesday despite retreating from recent highs, while West Texas Intermediate traded above $103 a barrel as supply risks linked to the Middle East continued to support prices.

For Nigeria, higher oil prices potentially provide a significant boost to government and foreign exchange earnings because crude remains the country’s dominant source of export dollars.

But the combination of lower FX turnover and a stronger reserve position presents a mixed picture for the currency market.

On one hand, the narrow trading range suggests the naira is experiencing relatively limited volatility compared with previous periods of severe foreign exchange pressure. On the other, a sharp reduction in transaction volumes could indicate weaker market liquidity or lower demand and supply activity among authorised participants.

This matters to businesses because the availability and predictability of dollars are often more important than the headline exchange rate. Importers require reliable access to foreign exchange to pay for machinery, raw materials, medicines and other inputs, while exporters depend on an efficient market to convert proceeds.

A more liquid official market would also help strengthen price discovery and reduce incentives for businesses and individuals to seek dollars outside formal channels.

The latest session therefore leaves the naira broadly stable but highlights the need to sustain foreign exchange liquidity alongside the accumulation of reserves.

With reserves above $54.6 billion and oil prices remaining elevated, Nigeria has a stronger external buffer than it did at the start of the year. The next test is whether that strength can be translated into deeper FX market liquidity, predictable dollar access and sustained currency stability for businesses and households.