Nigeria’s foreign exchange market opened the week on a positive trajectory, as improved dollar inflows and rising crude oil prices provided support for the local currency. The development signals a temporary easing of pressure on the naira, which has faced sustained volatility in recent months due to global uncertainties and domestic liquidity constraints.
Latest data from the Central Bank of Nigeria indicates that the local currency recorded modest gains at the official window, reflecting the impact of policy interventions and improving external conditions.
Naira strengthens to N1,357/$ amid improved forex inflows
Market data confirms that the naira strengthens to N1,357/$ amid improved forex inflows, appreciating by N8.46 at the Nigerian Foreign Exchange Market (NFEM).
The currency closed at N1,357.77 per dollar, compared to N1,366.23 recorded at the end of last week, representing a 0.62 per cent gain. This marks a positive start to the trading week and suggests renewed investor confidence, albeit cautiously.
At the parallel market, however, the naira remained relatively stable at around N1,410 per dollar, creating a gap of over N50 between the official and unofficial exchange rates.
Analysts note that the divergence reflects structural inefficiencies in the forex market, even as naira strengthens to N1,357/$ amid improved forex inflows at the official window.
Oil price rally boosts dollar liquidity
A key driver behind the currency’s appreciation is the recent rally in global crude oil prices, which has strengthened Nigeria’s export earnings.
As Africa’s largest oil producer, Nigeria relies heavily on crude exports for foreign exchange inflows. Higher oil prices typically translate into increased dollar supply, supporting the naira.
The current uptrend in oil prices has been linked to geopolitical tensions in the Middle East, which have disrupted supply chains and tightened global markets.
This has created favourable conditions for oil-exporting countries, helping explain why naira strengthens to N1,357/$ amid improved forex inflows.
External reserves cross $50 billion
Further supporting the currency is the steady build-up in Nigeria’s external reserves.
Data shows that the country’s gross reserves have surpassed the $50 billion mark, reaching approximately $50.027 billion as of mid-March. This represents the 11th consecutive week of reserve accretion.
Rising reserves enhance the central bank’s ability to intervene in the forex market, stabilise the currency, and meet external obligations
Market participants view this development as a positive signal, reinforcing confidence that naira strengthens to N1,357/$ amid improved forex inflows may be sustained in the short term.
CBN interventions stabilise market
The Central Bank’s measured interventions in the forex market have also played a critical role in supporting the naira.
Through periodic dollar sales and liquidity management strategies, the apex bank has been able to moderate volatility and prevent sharp depreciation.
Analysts say the current approach reflects a more disciplined and strategic use of reserves, aimed at maintaining market stability without distorting price discovery.
This policy stance has contributed significantly to the trend where naira strengthens to N1,357/$ amid improved forex inflows, even amid global uncertainty.
Investor sentiment remains cautious
Despite the recent gains, analysts warn that the naira could still face pressure in the coming weeks.
Research firm Cordros Capital notes that foreign portfolio inflows remain subdued, largely due to heightened geopolitical risks and a cautious global investment climate.
The ongoing tensions involving the United States and Iran have triggered risk-off sentiment among international investors, limiting capital inflows into emerging markets like Nigeria.
As a result, while naira strengthens to N1,357/$ amid improved forex inflows, the outlook remains fragile.
Parallel market dynamics persist
The stability of the naira in the parallel market suggests that demand pressures remain elevated outside the official window.
The widening gap between official and parallel rates indicates ongoing supply constraints and structural imbalances in the forex system.
Experts argue that narrowing this gap will require sustained reforms, increased transparency, and improved access to foreign exchange for businesses and individuals.
Until these issues are addressed, the benefits of the trend where naira strengthens to N1,357/$ amid improved forex inflows may not be fully felt across the broader economy.
Outlook for the naira
Looking ahead, the trajectory of the naira will depend on several key factors, including oil price movements, foreign investment flows, and the effectiveness of monetary policy.
Continued growth in external reserves and stable oil earnings could provide further support for the currency.
However, risks such as global economic uncertainty, geopolitical tensions, and domestic structural challenges remain significant.
Analysts believe that while short-term stability is achievable, long-term sustainability will require deeper reforms in Nigeria’s foreign exchange market and broader economy.
Ultimately, the development that naira strengthens to N1,357/$ amid improved forex inflows highlights both the progress made and the challenges that remain in stabilising Nigeria’s currency.
