Naira Sheds Weight Amidst Declining Foreign Reserves
The naira depreciated by ₦14.80 to close at ₦1,358.44/$ in the official market, data published by the Central Bank revealed. The local currency weakened against the dollar as eligible FX used requests exceeded total FX supply, amid a slowdown in foreign reserves.
Nigeria’s gross external reserves declined by $172.54 million to $48.45 billion at the close of the trading session on Friday in the absence of additional inflows and persistent FX intervention.
A slew of economists attributes the sustained decline in external reserves to continued CBN interventions to support the currency, ongoing debt service obligations, weaker oil revenue inflows, and capital outflows driven by foreign investor exits.
In the oil market, crude prices extended their gains for a fifth consecutive session, with Brent crude trading at $105.40 per barrel and WTI at $95.31 per barrel at the time of writing.
However, Nigeria’s Bonny Light crude declined 3.99% to $113.31 per barrel amid geopolitical concerns and heightened supply risks.
In its market update, Cowry Asset Limited told investors that near-term pressure on the naira is likely to persist amid continued FX demand pressures, sustained CBN market interventions, and weakening reserve buffers driven by debt servicing and softer external inflows.
Analysts said elevated global crude oil prices could provide some support to Nigeria’s external position if translated into improved export earnings.
Market stability will largely depend on the pace of FX inflows, oil revenue performance, and the extent of capital flow normalisation in the coming week.
In the parallel market, the local currency exchange rate is steady at ₦1,400/$ week on week. As a result, the FX spread narrowed to 3.06% from 4.19% in the prior week, according to TrustBanc Financial Group.
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