Naira Loses N7 as Bonny Light, Nigeria’s US Dollar Reserves Ease
The naira weakened against the US dollar by N7 in the Nigerian foreign exchange market as demand pressure rose week on week, amid a moderate decline in Bonny Light crude oil and foreign reserves.
Externally, global oil markets saw Brent and US West Texas Intermediate prices decline amid the unresolved US-Iran conflict. Still, oil prices remained elevated, raising the odds of a US Federal Reserve rate hike due to inflation risk.
Reflecting a sustained pattern seen in recent weeks, Nigeria recorded sustained outflows of US dollars from the economy as seasonal demand for imports and non-bank corporate FX payments edged higher.
Amid a strong US dollar, the naira posted mixed performance in the foreign exchange market last week, with marginal depreciation in the official window and slight appreciation in the parallel market.
At the Nigerian Foreign Exchange Market (NFEM), the naira weakened 0.53% week-on-week to N1,353.9741/US$, depreciating from N1,346.7945/US$ the previous week, a N7.18 depreciation.
Conversely, the parallel market rate appreciated marginally by 0.07% to N1,393.00/US$, down from N1,394.00/US$, narrowing the disparity between the two market segments.
Data from the Central Bank of Nigeria (CBN) showed external buffers came under mild pressure, as gross foreign exchange reserves fell 0.34% week-on-week to $54.87 billion from $55.06 billion.
The nation’s gross external dollar account settled FX contracts, swap arrangements, and import bills, while the authority maintained its stance of defending the local unit at the official window.
Nigeria’s foreign reserves fell as crude oil prices softened, with Bonny Light down 2.00% to $96.93 per barrel from $98.91 per barrel.
Reversing earlier trend, oil prices edged higher on Friday but remained on course for a second consecutive weekly decline, as easing concerns over renewed direct conflict between the United States and Iran offset lingering supply risks from attacks on shipping routes.
The softer oil price environment could weigh on Nigeria’s potential foreign exchange inflows, particularly if sustained, Cowry Asset Management Limited said in its commentary note.
Looking ahead, analysts at the investment firm expect the naira to trade within a relatively stable range in the coming week, supported by ongoing FX market interventions and supply-side measures.
They noted that underlying external pressures remain, as moderating gross reserves and weaker crude oil prices could constrain dollar inflows and limit further naira appreciation.
The investment firm added that market direction will largely depend on FX supply strength, developments in the oil market, and the CBN’s continued efforts to maintain exchange rate stability. Nigeria Eurobonds Yields Ease as Offshore Investors Buy Dollar Debt
