Nigeria: Naira Strengthens to N1,540 as CBN Injects $124 Million to Bolster FX Liquidity

The naira closed the week on a stronger footing in Nigeria’s autonomous foreign exchange market, supported by improved liquidity and sustained dollar inflows. According to data from the FMDQ platform, the local currency appreciated by 0.32%, settling at N1,540.00 per US dollar in the official market. This performance was bolstered by interventions from the Central Bank of Nigeria (CBN) and increased dollar sales by exporters, which helped ease demand pressures.

Throughout the week, the naira traded within a narrow range, fluctuating between N1,500.00 and N1,560.00, according to AIICO Capital Limited. The CBN’s intervention, which saw the sale of $124.60 million to authorized dealers, was instrumental in stabilizing the naira amidst persistent demand for foreign exchange.

In the forex markets, transactions were concluded between N1,520.00 and N1,549.00, reflecting a 2.2% weekly appreciation of the naira. This gain was attributed to enhanced foreign currency liquidity and elevated confidence in the FX market.

Additionally, Nigeria’s foreign reserves recorded a significant boost, rising by $210.73 million to $40.53 billion, further reinforcing the CBN’s ability to support the local currency. The increase was attributed to improved FX inflows, which sustained market stability.

However, overall turnover in the official market dropped by 70.5%, settling at $619.61 million on Thursday, with transactions ranging between N1,591.60 and N1,700.00 per US dollar.

In the forwards market, the naira experienced gains across various tenors:

• 1-month forward: +2.5% to N1,580.29
• 3-month forward: +4.4% to N1,639.10
• 6-month forward: +3.6% to N1,726.75
• 1-year forward: +5.0% to N1,900.89

Meanwhile, in the parallel market, the exchange rate ended the week at N1,635.00 per US dollar.

Despite the positive outlook, market analysts from Cordros Capital Limited cautioned that the slowdown in foreign portfolio investment (FPI) inflows continues to constrain overall FX liquidity. They noted that while the CBN’s interventions have provided moderate relief, the naira may remain under pressure in the short term if FPI inflows fail to improve significantly.

Global Market Trends

Elsewhere, oil prices experienced an uptick, marking their first weekly increase since late November. Supply concerns stemming from new sanctions on Iran and Russia helped push Brent crude prices to $73.92 per barrel, while WTI crude settled at $70.64 per barrel, despite broader concerns about a potential surplus in the market.

In the commodities market, gold prices dipped slightly but remained poised for a strong weekly close ahead of the U.S. Federal Reserve’s December meeting, where another interest rate cut is anticipated. Gold traded at approximately $2,671.39 per ounce.

The week’s developments reflect a cautious optimism for the naira, buoyed by CBN interventions and strengthening market fundamentals, though challenges in FX liquidity persist.