Naira Plunges as Offshore Demand Eclipses FX Inflows
Reversing recent past positive movements, the Nigerian local currency, the naira, plunged against the US dollar across the foreign exchange (FX) markets due to tight liquidity levels available at the supply side.
Both the official and parallel markets felt the negative impacts of US dollar scarcity, with demand rising faster than market supply. Spot data from the FMDQ platform revealed that the naira depreciated by 0.33%, closing at ₦1,517.24 per US dollar on Friday even as the Central Bank restarted FX sales to banks.
The local currency wobbled in the week, reversing the previous trend due to rising US dollar upstreaming by companies, foreign investors.
“The naira depreciated this week due to tight dollar liquidity and increased demand from foreign portfolio investors and local corporates,” AIICO Capital Limited said again in a note. The investment firm said offshore demand remained strong, pushing rates higher despite the CBN selling over $131.7 million in intervention sales—the second-largest single-day sale this year.
According to the firm, the official foreign exchange market opened at ₦1,510/$ and saw heavy bids, driving the Naira to ₦1,540/₦1,560 by week’s end. Despite bond sell-offs, demand for FX remained high and was fueled by concerns over Brent crude levels.
Total market turnover reached $320 million, with some trades yet to be recorded, according to AIICO Capital Limited. Overall, the Naira weakened by 1.659% week on week, closing at ₦1,517.24/$ from ₦1,492.49/$ the previous week.
Analysts said the CBN’s management of market supply will dictate currency movements. With reserves exceeding $38 billion, the CBN has sufficient resources to stabilize the currency. In the parallel market, the naira lost N70 to close at N1,570 per US dollar as supply side tightened.
Oil prices rose on Friday but pulled back from session highs after U.S. President Donald Trump warned of potential sanctions on Russia if it failed to negotiate a cease-fire with Ukraine.
In a post on Truth Social, Trump stated he was “strongly considering” imposing sanctions on Russian banks and tariffs on Russian goods due to ongoing military actions. Brent crude climbed $1.10 (1.58%) to $70.56 per barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.06 (1.6%) to $67.42.
Meanwhile, gold prices dipped slightly but remained on track for a weekly gain, driven by safe-haven demand and weaker-than-expected U.S. job growth. Spot gold fell 0.1% to $2,906.04 an ounce. #Naira Plunges as Offshore Demand Eclipses FX Inflows World Must Listen to Africa — Chinese Foreign Minister
