Naira Falls as Nigeria’s Bonny Light Crude Plunges by 11%
The naira fell by N10 per US dollar in the Nigerian foreign exchange market (NFEM) on a week-on-week basis due to a liquidity shortfall.
The official rate weakened in the absence of inflows from the Apex Bank to bolster liquidity, and FX inflows contributions from foreign portfolio investors, exporters, and non-bank corporates.
According to Broadstreet analysts, tight hard currency supply amid sustained foreign payment demand kept the exchange rate under pressure in 4 of 5 trading sessions at the official window.
The weak exchange rate was exacerbated by an 11% plunge in Bonny Light crude oil prices, weakening Nigeria’s fiscal performance outlook for the second half of the year.
Analysts said geopolitical stability is fast changing the oil market narrative, which is negative for Nigeria’s hydrocarbon inflows. “We have an idea of where we are going if there is peace in the Middle East – oil price falling to pre-war levels is not positive for Nigeria’s fiscal performance outlook”, analysts said.
A slew of analysts told MarketForces Africa that the direction of fixed-income market yields will determine whether foreign investors keep the dollar at home or shift base. What this means is that interest rates will remain elevated for 2026 – Nigeria cannot afford to cut back rates with the US Federal Reserve hawkish tone”
Despite relatively healthy external reserves, the Central Bank of Nigeria (CBN) has scaled back FX intervention for about 2 months, leaving the naira and US dollar to the forces of demand and supply.
Foreign portfolio investors’ inflows, exporters’ contributions, and non-bank corporate supply, together with contributions from individuals and other sources, have been driving momentum amid CBN’s zero FX injection.
In the official market, the local unit depreciated to ₦1,380.93/US$ from N1,370.4556 at the beginning of the week, while the parallel market value lost N20 to close at ₦1,400/US$.
Updated data from the CBN revealed that Nigeria’s gross external reserves increased by 0.37% week-on-week to $51.25 billion, providing some support to the country’s external liquidity position. The boost was supported by an oil windfall from the war in the Middle East.
In the global market, the tide is turning. Oil prices fell to pre-war levels during the week. The oil market recorded a weekly price decline as easing geopolitical concerns and a notable recovery in tanker movements through the Strait of Hormuz weighed on market sentiment.
Data obtained from the international oil market indicated that Brent crude traded lower at $72.98 per barrel, while West Texas Intermediate (WTI) stood at $69.55 per barrel.
Although reports of an Iranian strike on a commercial vessel in the Strait briefly triggered a 2% rebound in oil prices, the recovery proved short-lived as investors remained optimistic about the continued normalisation of shipping activity in the region.
Market reports showed that Nigeria’s Bonny Light crude declined by 10.93% week-on-week to settle at $72.70 per barrel.
The naira is expected to remain under pressure in the near term amid persistent FX demand, although higher external reserves may help cushion excessive volatility, Cowry Asset Management Limited said in a commentary note.
Analysts said crude oil prices are likely to remain volatile as markets continue to monitor geopolitical developments, global demand conditions, and OPEC+ supply decisions. #Naira Hovers Around N1,380 as Interbank FX Turnover Surges
