Naira Registers Slight Gain as CBN Turns Off FX Tap Briefly
The naira held strong against the US dollar in the local currency markets, where there have been floods of FX flows from the Central Bank of Nigeria’s (CBN) aggressive interventions.
The direct FX sales to authorised dealer banks and OMO bills offering that allow foreign investors’ participation have been driving liquidity in the currency market.
Last data revealed that the local currency traded at N1,500 per greenback at the official window and gained 93 kobo week on week while the CBN turned off FX tap for five days in a roll.
Without new FX intervention, the naira also recorded a gain at the parallel market, where currency traders offer the US dollar for N1505 as of Friday, gaining N10 week on week.
FX spread, or the gap between the official and parallel market quotes, has reduced to N5 on each US dollar. Nigeria’s FX market has turned the corner since Dec. 2, when the CBN launched electronic trading platform Blomberg BMatch.
Market efficiency, improved transparency, and access to liquidity have helped the naira survive negative expectations often associated with early-year demand.
In February, the naira fell by 1.69% in the official market but rose by 7.33% in the parallel market, bringing its year-to-date gain to 2.48% and 9.67% in the official and parallel markets, respectively, TrustBanc Financial Group Limited told investors in a note.
On FX transparency, Verto, a global cross-border platform, said in macro update claimed order books On Bloomberg BMatch, turnover figures have not been published, saying authorised dealers continue to be the only participants privy to the EFEMS and the liquidity therein.
Nigeria’s gross external reserves declined to $39.10 billion, according to data from the CBN. A slew of analysts and investment banking firms associate the decline with FX interventions.
“While we believe that this has not been for the purposes of intervening directly in the rate, rather it has been simply supporting liquidity flow. This will not bode well if the CBN feels obliged to continue over the long term.
“While there are question marks over the reported Foreign Reserve figures—given the continued suspicion around NNPC FX Backlog—even these numbers have dropped towards $40 billion after peaking at the end of 2024.
“If reserves continue to dwindle on the back of USD supply into NAFEM, this will inevitably reach a breaking point—all else being equal,” Verto said in the report.
After months of turbulence, the naira has shown signs of stability, settling around ₦1,500/$ after falling to ₦1,900/$ at its weakest. While optimists view this as a sign that CBN’s policy interventions are working, skeptics argue that the currency’s long-term strength is far from restored.
“A major challenge remains speculative hoarding, which has long fueled naira volatility. With speculators, hedgers, and policymakers locked in a battle, many are watching for signs of weakness that could trigger another wave of depreciation.
“So far, CBN’s tighter liquidity controls, improved dollar inflows, and stronger reserves have helped ease pressure on the naira.
“However, sustaining this momentum will require more than intervention—it demands fundamental structural reforms to ensure lasting FX market stability,” TrustBanc Group said in an investors update.
The CBN claimed FX inflows into the market have been strong following the introduction of an automated FX trading platform in December.
Apart from US dollar borrowings, Nigeria has also reported increased FX inflows from remittances. Also, foreign investors have flooded the market with hot money chasing high-return fixed interest securities investment options.
“If USD supply is genuinely increasing from offshore, there’s a few reasonable sources to point to. At the end of 2024, China renewed its bilateral FX swap agreement with Nigeria.
“Whilst this renewal will not move the needle in the first instance, if this three-year agreement had not been renewed, the repercussions could’ve been catastrophic
“With nearly $15 billion of total trade from China, this made the Asian superpower the largest trading partner with Nigeria,” Verto said in a macro update on Nigeria. #Naira Registers Slight Gain as CBN Turns Off FX Tap Briefly Naira Exchange Rates Switch Positions in FX Markets
