Nigeria’s local currency extended its downward trend at the end of the trading week, recording fresh losses against the United States dollar across both official and parallel foreign exchange markets.
Latest data released by the Central Bank of Nigeria (CBN) indicates that the naira closed Friday trading weaker than its previous levels, reflecting sustained pressure on the country’s foreign exchange supply.
Market analysts say the latest movement highlights ongoing volatility in Nigeria’s currency market as demand for foreign exchange continues to outpace supply.
Naira depreciation against dollar continues for second consecutive week
The latest figures confirm that naira depreciation against dollar has now persisted for a second consecutive week, raising renewed concerns about exchange rate stability in Africa’s largest economy.
According to official data, the naira closed at approximately N1,393.26 per dollar at the Nigerian Foreign Exchange Market.
This represents a daily drop of about N5.81 compared with the previous trading rate of N1,387.45 per dollar.
On a week-to-week basis, the naira also weakened by nearly N29.87 against the dollar in the official market.
Currency analysts say the sustained naira depreciation against dollar signals persistent structural pressures affecting Nigeria’s foreign exchange system, including limited dollar inflows and strong demand from importers and investors.
Over a two-week period, the currency has shed roughly N46.94 against the US dollar at the official market.
Parallel market also reflects currency pressure
The trend of naira depreciation against dollar was also evident in the parallel market, often referred to as the black market.
Currency traders operating within Abuja’s Bureau de Change hub reported that the naira exchanged at around N1,415 per dollar by the close of trading on Friday.
This represents a decline of approximately N45 compared to the N1,370 exchange rate recorded about two weeks earlier.
Bureau de Change operators said the widening gap between supply and demand continues to influence market behaviour.
Many importers, businesses, and individuals often turn to the parallel market when official foreign exchange supplies become limited.
The resulting demand pressure frequently pushes the exchange rate higher.
CBN interventions yet to stabilise currency
The Central Bank of Nigeria has recently implemented several measures aimed at stabilising the foreign exchange market.
Among these steps are targeted dollar interventions designed to improve liquidity and moderate exchange rate volatility.
The interventions were acknowledged recently by Bola Ahmed Tinubu, who indicated that authorities were working to manage pressure within the forex market.
However, despite these efforts, the naira depreciation against dollar has persisted.
Financial analysts note that such interventions may offer short-term relief but do not necessarily resolve deeper structural issues affecting the currency.
These challenges include declining oil revenue inflows, capital outflows, and strong demand for foreign exchange from import-dependent sectors of the economy.
Economic implications of a weaker naira
The continued naira depreciation against dollar could have significant economic implications if the trend persists.
A weaker currency generally raises the cost of imports, including essential goods such as fuel, machinery, and food products.
As import costs increase, businesses may pass those expenses on to consumers, potentially contributing to inflationary pressures.
Economic analysts warn that exchange rate volatility can also affect investor confidence, particularly in emerging markets where currency stability is closely linked to broader economic performance.
For businesses that rely heavily on imported raw materials, the fluctuating value of the naira complicates financial planning and cost management.
At the same time, some sectors may benefit modestly from a weaker currency.
Export-oriented industries could find their products more competitive in international markets due to the lower value of the naira.
Outlook for Nigeria’s foreign exchange market
Currency experts say the direction of the naira in the coming weeks will depend on several key factors.
These include the level of foreign exchange inflows into the economy, the effectiveness of policy measures introduced by monetary authorities, and global economic conditions affecting oil prices and capital flows.
Nigeria’s foreign exchange market remains heavily influenced by oil earnings, which account for a significant share of government revenue and foreign currency inflows.
If global crude oil prices remain favourable, analysts say it could provide some relief for the country’s forex reserves and support exchange rate stability.
However, without sustained increases in dollar supply and structural reforms to improve foreign exchange inflows, the naira depreciation against dollar could remain a persistent challenge for policymakers and market participants.
