Naira Gains 3.6% as Foreign Investors Move Dollar to Nigeria
The naira strengthened by about 3.6% against the U.S. dollar at the foreign exchange market in January 2025, on increased offshore FX inflows and the absence of significant demand for international payments.
With N35 gain per dollar week on week, the spot FX rate closed at ₦1,386.55/$ in the official market, intraweek low of N1381, signaling a positive outlook for the local currency as reforms neutralized arbitrage and speculation in the currency market.
In the parallel market, it appreciated by ₦25.00, settling at ₦1,460.00/$ at the close of business on Friday. In its commentary note, TrustBanc Financial Group highlighted that FX spread widened to 5.30% from 4.46% last week.
Stability prevailed throughout the month, with modest Naira appreciation driven by improved FX liquidity from foreign portfolio investors (FPIs), local market participants, and minimal CBN intervention.
In January, the Naira has gained 3.55% officially and 0.68% in the parallel market amidst growing external reserves. Nigeria’s gross external reserves surpassed $46 billion last month, supported by inflows from higher crude oil receipts and other sources.
Gross external reserve rose by $687.40 million in 30 days to $46.18 billion, driven by improved FX inflows, oil receipts, remittances, and sustained stabilization measures.
Analysts said foreign portfolio investments have been flooding Nigeria’s financial markets as yields on naira assets remain attractive to draw offshore portfolio building.
The market anticipates positive development in the currency market in February, supported by a significant surge in external reserves in January despite lower FX interventions.
“The naira is expected to maintain moderate gains, supported by steady oil receipts, stronger non-oil inflows, and a trade surplus. Oil prices are likely to remain stable to mildly bullish, reflecting steady global demand and the U.S. Fed’s unchanged interest rates”, Cowry Asset Limited said.
Analysts at AIICO Capital Limited expect the naira to remain volatile but broadly stable, with modest appreciation in February.
“Robust external reserves and expectations of sustained high crude oil prices should provide support, alongside ongoing monetary and fiscal reforms aimed at boosting foreign inflows. Downside risks from external shocks are expected to remain limited in the near term”, AIICO Capital added. First Holdco Profit Sinks by 93% after Forbearance Withdrawal
