Nigeria: Naira Firms as Corporate Dollar Demand Eases Amid CBN’s Strategic Support

The Nigerian naira posted modest gains last week against the US dollar, buoyed by subdued corporate demand for foreign exchange and signs of stabilisation in the official market. At the close of trading on Friday, the naira appreciated to ₦1,598.72/USD, recovering from an opening rate of ₦1,606.15 at the Central Bank of Nigeria (CBN)’s official foreign exchange window.

Market data indicates that the exchange rate is gradually consolidating around the ₦1,600/USD level, supported by reduced corporate dollar demand, marginal foreign investor inflows, and sustained regulatory interventions. Despite largely staying on the sidelines during the week, the CBN made a visible intervention on Friday, selling $40 million to bolster FX supply, according to AIICO Capital Limited.

Investor sentiment toward the local currency has improved marginally, but market participants maintain that CBN’s role remains critical to naira stability. Recent market volatility had been exacerbated by external pressures, including fluctuating crude oil prices and global trade uncertainties that drove capital outflows and weakened FX liquidity.

Oil market dynamics continued to weigh on Nigeria’s external balance. Crude oil prices slid earlier in the week amid weaker global demand projections and OPEC+ decisions to gradually lift supply levels, raising concerns about Nigeria’s fiscal resilience and the sustainability of its external reserves.

To manage pressures on the naira and enhance market confidence, the CBN intensified its foreign exchange interventions in Q2 2025. Based on FMDQ data, net CBN inflows into the FX market rose to $2.61 billion in March and April, a significant reversal from the $928.40 million net outflow recorded in January and February.

Despite these efforts, Nigeria’s external reserves experienced volatility, recovering to $38.34 billion last week after dipping to an 8-month low of $37.80 billion in April due to higher FX supply and debt servicing obligations.

Cordros Capital Limited noted that the naira weakened by an average of 3.52% in April to ₦1,579.80/USD, compared to ₦1,524.27/USD in March. So far in May, exchange rates have fluctuated within a narrow band of ₦1,589–₦1,615/USD, indicating persistent market caution.

Analysts warn that risks to the naira’s near-term outlook remain tilted to the downside, largely due to lingering global uncertainty, despite some relief from easing US-China trade tensions.

Elsewhere, oil prices recorded modest gains on Friday, with Brent crude rising by 1.5% to $65.50 per barrel, and WTIalso up by 1.6% to $62.59 per barrel, marking a second consecutive weekly gain. However, sentiment was tempered by potential increases in global supply, notably from Iran and the OPEC+ alliance.

Meanwhile, gold prices faced downward pressure, retreating nearly 10% from April’s record high of $3,500 per ounceto around $3,180, reflecting shifts in investor appetite as trade tensions eased. Despite the pullback, long-term forecasts for gold remain positive.