Exchange Rates Gap Sinks in Nigerian Forex Markets
EXCHANGE RATES: The naira traded strong against the US dollar during the week as the gap between the official and parallel market rates, the FX spread, significantly decreased to N2 by the end of trading on Friday. In the just concluded week, the local currency surged against the US dollar in four out of five trading sessions at the Nigerian Foreign Exchange Market (NFEM).
After successive gaining streaks, the naira’s spot rate slipped to N1528.56 per dollar at the official window, while the parallel market quote settled at N1530. The reduced FX spread would ease speculative demand for the dollar, analysts said, with the Apex Bank’s efforts to remove market distortions from the supply side.
Recall that the Nigerian official currency market opened quietly, with trading levels ranging between N1525 and N1535, driven by sell-offs from FPIs and interbank counterparties positioning ahead of the CBN’s OMO auction.
With sufficient US dollar volume, the exchange rates settled below N1530 midweek, supported by inflows from foreign portfolio investors (FPIs) and oil-exporting corporates, according to analysts at AIICO Capital Limited.
The naira has stayed strong even without CBN direct interventions in the forex market since June 20. Analysts reported that fixings trended downward across the sessions, reflecting organic strengthening of the naira, with trades even consummated below N1500.
By week’s end, the Naira nairaciated by 69.3 basis points week on week to close at N1,528.5616 per dollar, while FX reserves dipped by $138.30 million to $37.181 billion, indicating sustained demand and tight central bank supply.
Analysts at AIICO Capital Limited said the naira is expected to strengthen on better dollar supply, though tariff-related and oil output risks could limit gains. Elsewhere, oil prices dipped slightly on Friday during thin trading, as investors awaited the outcome of the upcoming OPEC+ meeting, where an output increase is anticipated.
Brent crude futures fell 50 cents, or 0.7%, to $68.30 per barrel, while U.S. West Texas Intermediate crude dropped 50 cents, or 0.75%, to $66.50. Trading activity was subdued due to the U.S. Independence Day holiday.
Meanwhile, gold prices rebounded and were on track for a weekly gain, supported by a weaker U.S. dollar and safe-haven demand, with President Trump’s trade deadline approaching. Spot gold rose 0.3% to $3,336.39 an ounce. Analysts said if the group raises output by another 411,000 bpd in August as expected, oil balance forecasts for H2 will likely be revised to reflect faster growth in global reserves.
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