Naira Strengthens as Corporate Demand for Dollar Reduces
Boosted by lower corporate FX demand, the Nigerian naira reclaimed value against the dominant currency, the US dollar, as the spot rate closed at N1598.72 per greenback at the official FX market.
The naira opened the week at N1606.15 at the Central Bank of Nigeria (CBN) official FX market but ended the week at N1598.72 at the end of the trading session on Friday. Data revealed that the naira exchange rate has stabilised around N1600 as the CBN continued to intervene in the currency market heavily.
Foreign investor flows and reduced corporate dollar demand supported the naira, with CBN interventions largely absent except for a minor presence on Friday, AIICO Capital Limited revealed. The investment firm added that the CBN sold $40.00 million during the week to banks to drive supply, but the market was strong in terms of liquidity conditions.
The naira has been under pressure as heightened global uncertainty stemming from the tariff war triggered capital outflows from foreign portfolio investors, further tightening FX liquidity.
At the moment, the foreign exchange market players said they cannot imagine the naira exchange rate position without the visible hands of the CBN support. The pressures on the local currency worsened in the recent past due to fluctuations in oil prices in the global commodity market.
International oil prices declined amid expectations of softer global demand and OPEC and its allies’ decision to raise crude oil supply, amplifying concerns about Nigeria’s external earnings outlook and the sustainability of its FX reserves.
The CBN became more aggressive with FX intervention to meet the shortfall and curb excess naira volatility. Based on data from the FMDQ, CBN’s net inflow into the FX market in March and April reached USD2.61 billion, compared to the net outflow of USD928.40 million in January and February this year, when capital inflows were stronger.
External reserves began fresh momentum, settling at $38.335 billion last week, according to data from the CBN. In April, the external reserves also fell to an 8-month low of $37.80 billion on account of higher FX supply and debt service payments.
On average, the naira weakened by 3.52% to N1,579.80 in April from N1,524.27 in March, Cordros Capital Limited said in a note. So far in May, the closing rate has hovered around N1,589 – N1,615.
Analysts expressed concerns that risks to the naira’s stability in the near term are tilted to the downside given the persistent global uncertainty despite the ease in US trade tariffs.
Elsewhere, oil prices rose slightly on Friday, poised for a second weekly gain amid easing U.S.-China trade tensions, though gains were limited by prospects of increased supply from Iran and OPEC+. Brent crude climbed 97 cents, or 1.5%, to $65.50 per barrel, while U.S. West Texas Intermediate (WTI) also gained 97 cents, or 1.6%, to $62.59.
Meanwhile, gold prices dropped nearly 10% from April’s record high above $3,500 per ounce, weighed down by improving trade relations. Spot gold hovered around $3,180, setting it on course for its worst weekly performance in six months, despite forecasts of maintaining a positive long-term outlook. Renaissance Exceeds Oil Output Target by 40 % in One Month
