Naira Softens as Interbank FX Turnover Slumps by 18%
The naira eased to close at N1,329 per US dollar at the Nigerian foreign exchange market (NFEM) on Friday amid a slight liquidity squeeze.
The local currency weakened on signals that liquidity conditions tightened in the absence of FX intervention. Trading data showed that FX transactions fluctuated between N1328 and N1331 per US dollar at the official window on Friday.
US dollar turnover at the official window fell 17.7% to $2.25 billion, and the naira eased 0.06% to ₦1,329.51, AIICO Capital Limited said in a commentary note.
Traders said exchange rate improved from N1331.2027 per dollar at the beginning of the week to close at N1329.5138 at the close of session on Friday.
The local units weakened marginally by 0.07% week-on-week in the parallel market to N1,373.63/$, keeping the divergence between the two markets in focus.
Market analysts reported that Nigeria’s external reserves rose by 0.26% WoW to $54.86 billion, extending the recent improvement in the country’s external liquidity position.
The stronger reserve position provides some support for FX market stability, although sustained gains will remain dependent on foreign exchange inflows and broader external sector conditions, Cowry Asset Limited said.
In the crude oil market, Brent crude remained on track for a weekly gain, despite easing from Thursday’s close, as persistent concerns about potential disruptions to global oil supply in the Middle East continued to underpin prices.
Market sentiment remained sensitive to developments in the region, even as reports of a possible deal between the United States and Iran and estimates of continued oil flows through the Strait of Hormuz offered some relief.
At the time of writing, Brent crude was trading at $105.40 per barrel, up from approximately $102.00 at the start of the week. WTI, however, moved in the opposite direction, declining to $93.46 per barrel from around $98.00 at the beginning of the week.
Bonny Light crude also declined by 4.82% during the week, highlighting the divergence between global benchmark prices and Nigeria’s key crude grade.
“We expect the naira to maintain a relatively stable trend in the near term, supported by the improvement in external reserves and liquidity conditions”, Cowry Asset Limited said.
However, analysts noted that movements in global crude oil prices and developments in the Middle East could influence foreign exchange inflows and overall currency stability.
The investment firm said sustained strength in oil prices could provide some support for Nigeria’s external position, although weaker Bonny Light prices may moderate the benefit.
