Naira Strengthens to N1,320 to US Dollar at NFEM Window
The naira traded at N1320.5574 per US dollar in the Nigerian foreign exchange market (NFEM), according to updated FX data released by the Central Bank of Nigeria (CBN).
The local currency rose from N1321.2160, quoted on Friday. The spot FX rate hovered between N1318.5000 and N1322.5000 per dollar at the official window, reflecting improved FX liquidity.
Last week, the Naira appreciated by 0.97% over the 5 days at the NFEM window, closing at N1,322.50/US$1 on Friday, 4 September, compared with N1,335.50/US$1 at the start of the week.
The currency strengthened through most of the week, reaching N1,322.50/US$1 on Thursday and maintaining that level at the Friday close. In the parallel market, the Naira also strengthened, closing at around N1,400/US$1 on Thursday, from N1,390/US$1 previously.
This widened the premium over the NFEM rate to N68.78/US$1, from N62.71/US$1 in the prior week, suggesting that the divergence between the official and parallel markets remains.
Despite the Naira’s appreciation, FX market activity moderated during the week. Reported NFEM turnover for the period through 3 September declined to approximately US$2.14bn, from US$3.19bn in the preceding week, representing a 33.0% week-on-week decline.
The recent Naira strength appears to have occurred alongside lower trading activity rather than a broad-based increase in market turnover, the research subsidiary of Coronation Merchant Bank said in a note.
On the external liquidity front, gross FX reserves increased to US$54.08 billion as of 3 September, marking the first time since December 2008 that they have exceeded US$54 billion.
The reserves have risen by approximately US$8.6 billion since the beginning of the year, providing a stronger external buffer and supporting confidence in the CBN’s capacity to manage FX pressures.
“Looking ahead, we expect the Naira to remain broadly stable in the near term, supported by an improvement in external reserves and relatively contained exchange-rate pressures”, Coronation said.
However, analysts said the decline in FX turnover suggests that the recent appreciation should be monitored for confirmation through stronger underlying market activity.
Analysts at Coronation said they expect the NFEM rate to trade broadly within the N1,300–N1,350/US$1 range, barring a material deterioration in global risk sentiment, a sharp decline in oil prices, or other adverse external shocks.
Investor sentiment also benefits from Moody’s revision of Nigeria’s sovereign outlook to “positive” from “stable”, reflecting improvements in the country’s external position and economic resilience.
In addition, Nigeria’s confirmed reclassification by FTSE Russell from Unclassified to Frontier Market status, effective from the market open on 21 September, should improve the visibility of Nigerian equities among international investors.
The extent to which the transaction generates additional FX liquidity will depend on foreign investors’ participation and funding sources. Top 5 Stocks with Buy Recommendations from Broadstreet
