Nigeria: Naira Holds Steady as FX Reserves Strengthen Amid Diminished Dollar Demand

The Nigerian naira maintained relative stability against the US dollar at the Nigerian Foreign Exchange Market (NFEM) on Monday, with the Central Bank of Nigeria (CBN) posting a spot rate of ₦1,598.68 per dollar.

This steadiness comes on the back of improved dollar liquidity at the official window, underpinned by reduced demand for foreign exchange over the previous week. Analysts observed that the FX market was supported by a combination of factors including sustained supply and subdued speculative activity.

However, pressure resurfaced in the parallel market, where the naira depreciated by 0.62% to close at ₦1,625 per dollar. The dip was attributed to increased demand for personal and business travel allowances, indicating persistent gaps between the official and informal market dynamics.

In a positive macroeconomic signal, Nigeria’s external reserves rose further, reflecting sustained FX inflows amid global market volatility. According to CBN data, the country’s gross external reserves climbed to $38.378 billion, bolstering investor confidence and reinforcing the apex bank’s capacity to manage short-term currency fluctuations.

The naira-dollar exchange rate traded within a narrow band last week, ranging from ₦1,595 to ₦1,603. The official window closed at ₦1,598.72, marking a 46 basis-point appreciation on a week-on-week basis, supported by a modest FX intervention of $40 million by the CBN.

Analysts project short-term stability in the naira, citing consistent foreign exchange supply from both the CBN and non-oil exporters. Nevertheless, they caution that rising FX demand or a potential reduction in interventions could reignite upward pressure on the exchange rate.

Globally, commodity markets opened the week on a cautious note. Oil prices were largely flat as investor sentiment weighed Moody’s downgrade of the U.S. credit outlook and weaker-than-expected Chinese economic data, including sluggish industrial output and retail sales. These developments heightened concerns about global demand for crude.

Brent crude slipped marginally by 1 cent to $65.39 per barrel, while the U.S. West Texas Intermediate (WTI) crude edged up by 9 cents to $62.58 per barrel ahead of Tuesday’s expiration of the June contract.

Meanwhile, gold prices advanced on the back of a weakening dollar and renewed safe-haven demand. Spot gold rose by 0.9% to $3,229.69 an ounce, reflecting investor risk aversion in the face of macroeconomic uncertainties.