Naira slips to 1,456.72/$ amid persistent FX demand pressure
Nigeria’s foreign exchange market witnessed another week of volatility as the naira weakened across both the official and parallel windows, despite continued improvement in the country’s external reserves.
The development underscores the delicate balance between rising dollar demand, modest inflows, and the Central Bank of Nigeria’s ongoing efforts to stabilise the currency through targeted interventions.
At the Nigerian Foreign Exchange Market, the naira depreciated by 0.99 per cent to close at 1,456.72 per US dollar on Friday, compared to 1,442.43/$ at the end of the previous week.
The currency experienced similar weakness in the parallel market, where it traded between 1,470/$ and 1,475/$, reflecting sustained pressure from non-official demand channels.
Market intelligence from Cowry Assets Management Limited revealed that the naira moved within a significantly wider trading band during the week, fluctuating between N1,440 and N1,460 at the official window.
According to the firm, softer dollar inflows were unable to offset firmer demand, especially from investors seeking to cover open FX positions.
Cowry Assets noted that the naira ultimately settled at 1,456.72/$, representing a 0.98 per cent week-on-week decline.
AIICO Capital echoed similar concerns, observing that the currency traded largely bearish throughout the week.
The firm explained that intensified early demand from investors and corporates placed additional pressure on the naira, even as the Central Bank executed several interventions to moderate volatility.
Despite these efforts, elevated demand continued to outweigh available supply, resulting in further depreciation.
External reserves rise, offering a cushion despite weaker naira
Interestingly, the depreciation of the naira occurred in the same week Nigeria’s external reserves recorded steady growth.
New data from the Central Bank showed that reserves rose from $43.64bn on November 14 to $44.19bn on Thursday, representing a 1.26 per cent increase over a few days.
This trend highlights an improvement in Nigeria’s FX buffers, even as short-term market pressures persist.
Analysts at Cowry Assets attributed the reserve build-up to stable oil receipts, stronger non-oil inflows, and a sustained trade surplus.
These factors, they said, reinforced the CBN’s broader strategy of supporting macro-liquidity and enhancing market confidence.
Despite the reserve increase, the currency’s direction suggests that FX supply remains insufficient to meet rising demand, particularly from importers, portfolio investors, and businesses settling foreign obligations.
Analysts note that without a significant boost in inflows, the naira may continue to encounter episodic pressure.
Naira slips to 1,456.72/$: Analysts maintain cautious outlook
Market watchers expect the FX market to adopt a cautious but steady posture in the coming days.
Cowry Assets projected that pricing will continue to reflect the strength and consistency of inflows rather than speculative activity.
The firm warned that lighter supply conditions could keep the naira under pressure unless fresh inflows improve meaningfully.
However, analysts believe that the combination of rising reserves and sustained CBN interventions should offer some stability in the short term.
Structural demand–supply mismatches, they noted, remain a challenge that cannot be resolved immediately without deeper reforms and expanded export earnings.
AIICO Capital, on its part, expressed optimism regarding short-term stability.
The firm said the naira is likely to remain stable in the near term, anchored by growing external reserves and improved market discipline.
Afrinvest also projected a relatively resilient outlook, predicting that the naira will trade within a familiar band over the next week.
According to the firm, market fundamentals remain favourable for short-to-medium-term stability, particularly as the CBN’s reserve position strengthens.
Analysts at Afrinvest further highlighted that the naira’s earlier stability—supported by six consecutive months of appreciation driven by CBN reforms—has played a notable role in Nigeria’s recent disinflation trend.
They cautioned, however, that sustaining FX stability will require effective management of foreign portfolio investor sentiment, especially regarding the forthcoming capital gains tax revisions expected in 2026.
MPC expected to consider dovish stance amid easing inflation pressures
Beyond the FX market, attention is now shifting to the Monetary Policy Committee meeting scheduled for November 24–25.
With inflation pressure reportedly easing and GDP growth remaining firm, analysts expect the committee to consider a softer policy stance.
Afrinvest projected a modest 25–50 basis point rate cut, suggesting that such a move would support the ongoing rally in government bonds.
The firm, however, added that the impact on equities would likely remain limited, given broader market conditions and investor sentiment.
Analysts believe that the recent suspension of the proposed 15 per cent tariff on petrol and diesel imports reduces short-term inflationary risks, giving the MPC more bandwidth to ease rates.
They argue that a slight rate cut could further consolidate the economy’s positive momentum while maintaining overall macro-stability.
Looking ahead: CBN intervention and inflow strength to shape naira trajectory
As the naira slips to 1,456.72/$, the market continues to monitor three critical variables: the pace of CBN intervention, the stability of external reserves, and the strength of FX inflows.
While reserves continue to rise and interventions remain consistent, analysts agree that a substantial improvement in dollar earnings—particularly from oil, non-oil exports, and remittances—will be essential in determining the naira’s long-term path.
For now, the currency is expected to trade within a narrow but pressured band, with intermittent fluctuations driven by market sentiment and liquidity conditions.
Analysts maintain that Nigeria’s foreign exchange landscape remains sensitive to global trends, local reforms, and investor confidence, all of which will shape the naira’s performance into the new week.
