Foreign Reserves, FX Intervention Positive for Naira Outlook – Notes
A robust foreign reserves balance of above $42 billion and sustained FX interventions have been identified as positive drivers of the naira exchange rate outlook.
A slew of analysts expressed the view that the naira could perform as initially expected for 2025 as Nigeria boosts its foreign receipts from oil revenue and foreign investors’ confidence in the local economy.
External reserves reached its highest level since 2019 on the back of sustained inflows, and the accretion has failed to slow down. The market now anticipates Nigeria’s foreign reserves to hit $45 billion by year, reflecting surge in price of Bonny Light crude oil which traded above $70 as of Friday.
Last week, the naira extended its winning streak across FX windows on the back of a softer U.S. dollar and stronger liquidity inflows.
FX liquidity was supported by improved liquidity from local participants, oil inflows, and offshore portfolio investors. Early sessions opened actively, with bids largely matching available supply, anchoring trades around ₦1,492–₦1,495/$.
Midweek, tight demand– supply dynamics initially pressured the market, pushing the rate to ₦1,498.00/$, before improved local dollar flows and modest CBN interventions restored calm.
Foreign portfolio investor inflows sustained an offered market tone, driving the naira firmer into the ₦1,471–₦1,487/$ range. Overall, the currency appreciated by 49 bps week on week to close at ₦1,480.66/$ – its first break below the ₦1,500/$ threshold since early February 2025.
The parallel market tracked the same upbeat mood, with the naira appreciating by 0.13% to an average of N1,510/$, according to a channel check conducted by Cowry Asset Limited.
External reserves added another layer of support, rising by 0.40% week-on-week to $42.225 billion from $42.03 billion, Central Bank of Nigeria (CBN) updated data revealed.
Analysts said the buildup, fuelled by improved FX inflows and steady CBN interventions, enhances the apex bank’s firepower to manage supply-demand gaps and bolsters confidence in the naira’s near-term stability.
In the global commodity market, oil rallied as supply fears resurfaced following Ukrainian strikes on Russian energy infrastructure that prompted Moscow to restrict fuel exports.
Brent crude edged up 0.33% to $69.65/bbl, while US WTI climbed 0.51% to $65.31/bbl, leaving both benchmarks on track for weekly gains above 4%. Nigeria’s Bonny Light outperformed, jumping 1.79% to settle at $70.90/bbl.
For Nigeria, the twin boost of firmer oil prices and modest reserve accretion provides a stronger buffer against external shocks while reinforcing the CBN’s capacity to defend the currency and safeguard macroeconomic stability.
The naira is expected to stay relatively stable across markets, supported by stronger FX inflows, reserve build-up, and sustained CBN interventions, Cowry Asset said in a note.
Analysts added that higher oil prices should further strengthen external buffers and investor confidence. Still, risks from global oil price swings and persistent domestic demand pressures mean sentiment could remain cautious.
“We anticipate that the recent stability in the FX market will be sustained in the near term, as the CBN continues to fine-tune its policies alongside fiscal measures by the FGN aimed at supporting liquidity,” AIICO Capital Limited said.
Investment firm Cordros Capital Limited maintained a positive outlook on the naira, supported by expectations of sustained FX liquidity.
“On the domestic front, rising non-oil exports and improving market confidence should underpin inflows, while externally, healthy FX reserves, a positive current account position, and a shift toward global monetary easing are expected to reinforce foreign investor sentiment and stimulate additional FX market inflows,” the firm said. Zenith Bank Surges after Interim Dividend Notice, YTD Return Rises
