Naira Skids as FX Demand Exceeds Dollar Volume
The naira skidded off the bull track in the Nigerian foreign exchange market (NFEM) as demand exceeded the US dollar volume supplied on Wednesday. According to data obtained from the Central Bank of Nigeria (CBN) daily forex platform, the naira fell to N1549.20 on Wednesday from N1345.26, which was quoted as the NFEM rate the previous day.
The spot rate movement suggests the exchange rate worsened on the day, reflecting higher demand and lower US dollar liquidity. The external reserves has fallen below the $38 billion mark as the apex bank maintained forex market interventions.
But analysts noted that the authority’s spending to keep the naira stable has eased compared to market development witnessed last month. The CBN defended the naira with $580 million in May with a sequence of forex market intervention sales.
The exchange rate is projected to stabilize around N1600 per dollar in 2025 amidst hope of economic recovery and a boost in fiscal performance. The market has acknowledged that the CBN has continued to supply forex into the currency market to support the local currency. The trend has become a norm, and has helped stabilise the naira.
“While we believe that this has not been for the purposes of intervening directly in the rate, rather it has been simply supporting liquidity flow. This will not bode well if the CBN feels obliged to continue over the long term”, Verto said in a macro update. In the parallel market, the naira weakened to trade at N1565.00/$.
FX market analysts are calling for more transparency and a bold move to refrain from over-supplying of US dollars from the CBN directly in a bid to narrow the official and parallel market rates.
Elsewhere, Oil prices ended higher on Wednesday after a volatile trading session as investors evaluated the risk of supply disruptions due to rising tensions between Iran and Israel and the possibility of U.S. intervention. Brent crude futures gained 25 cents to close at $76.70 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 30 cents to $75.14.
Earlier in the day, both benchmarks had fallen nearly 2%, following Tuesday’s sharp 4% rally. Meanwhile, gold prices slipped after the U.S. Federal Reserve kept interest rates unchanged and signaled fewer rate cuts ahead.
Fed Chair Jerome Powell also projected persistent inflation. Spot gold dipped 0.4% to $3,374.75, while U.S. gold futures edged up 0.03% to $3,408.10. Crude markets remain cautious as the Israel-Iran conflict creates significant uncertainty, with Brent crude potentially swinging between $68 and $83 per barrel depending on geopolitical developments.
