Naira Falls Across FX Markets on US Dollar Shortage
The naira fell against the US dollar by 0.36% to settle at N1506 at the Nigerian autonomous FX market with mild foreign currency shortage. Traders said FX transactions were consummated in the official window between N1490.00 N1515 as Central Bank of Nigeria (CBN) intervention slows.
Reflecting tight FX liquidity conditions, the Naira depreciated by N30 in the parallel market to close the day at N1580 per greenback. The naira has significantly depreciated since the liberalization of the exchange rate regime in June 2023.
In 2024, following changes to the pricing mechanism, the naira depreciated by 70% to N1,544 in December 2024 from about N900/$ in December 2023. “We expect the naira to remain broadly stable and trade between N1,625/$ and N1,650/$ over 2025-2026”, S&P Global said in its outlook.
The global ratings agency projected usable foreign currency reserves – gross reserves minus reserves held for forwards- will increase slightly to about $32.6 billion in 2025.
The projection was anchored on expectation that imports will remain subdued on the back of a weaker currency and lower demand while export receipts hold up.
Since the beginning of 2024, the CBN has implemented various measures to restore confidence in the FX market, attract foreign investors, and ensure effective price discovery for the Naira.
The most notable recent initiative is the introduction of the Electronic Foreign Exchange Matching System (EFEMS), designed to enhance market transparency and integrity. The automated FX trading platform has raised foreign investors’ confidence, and drive US dollar accretion into the financial market.
“We expect the local currency to continue its current daily gaining streak across the various FX market windows as the monetary authority continues to implement policies aimed at ensuring transparency in the market as well as price discovery’, Cowry Asset Limited said.
