Naira Weakens to ₦1,444/$1 as FX Pressure Persists Despite Rising Reserves
The Naira closed the week on a fragile note in the official foreign exchange (FX) market, settling at ₦1,444/$1 on Friday.1 This result confirms persistent demand pressure and a cautious market outlook, despite several positive macroeconomic signals from the Central Bank of Nigeria (CBN).
The currency struggled to maintain stability throughout the five trading days, reflecting ongoing volatility that is becoming a defining feature of Nigeria’s floating exchange rate regime.
Week-on-Week Performance: A Mild Depreciation
The Naira experienced a slight but notable weakening trend over the past week. Compared to the previous Friday’s closing rate of ₦1,438.5/$1, the latest closing of ₦1,444/$1 represents a mild depreciation.
Daily Movement in the Official Window:
| Day | Closing Rate |
| Monday | ₦1,437.50/$1 |
| Tuesday | ₦1,440.89/$1 |
| Wednesday | ₦1,444.85/$1 |
| Thursday | ₦1,441/$1 |
| Friday | ₦1,444/$1 |
The mid-week peak pressure on Wednesday (₦1,444.85/$1) suggests that underlying FX demand-supply imbalances remain a major challenge, causing the currency to fluctuate and ultimately close weaker.
The Paradox: Rising Foreign Reserves vs. Currency Weakness
Interestingly, the Naira’s continued strain occurred even as Nigeria’s foreign reserves maintained their upward trajectory, climbing to $43.5 billion, up from $43.32 billion the previous week.
Why the Reserves Growth Isn’t Halting Depreciation:
Bolstered Confidence: Rising reserves, driven by stronger crude oil receipts and improved non-oil inflows, typically boost confidence in the CBN’s ability to intervene in the market.
Market Forces Dominant: However, analysts note that the mild depreciation indicates that market forces—specifically, robust demand for dollars for imports and capital outflows—are currently outpacing the reserves build-up.
Liquidity Challenge: While reserves are growing, the actual FX liquidity available for daily trading in the official window remains a major determinant of the Naira’s price. Unless supply significantly increases, the currency will continue to face headwinds.
Analysts suggest that stabilizing the currency requires more than just reserves; it demands a potent combination of stronger export earnings, sustained investor confidence, and consistent monetary policy actions.
Pressure Extends to the Parallel Market
The pressure was not confined to the official window. The Naira equally weakened in the black market during the week, trading between ₦1,455/$1 and ₦1,463/$1.
This weakness comes at a challenging time for currency traders, as many Bureau De Change (BDC) operators are struggling to maintain operations. They attribute this difficulty primarily to the CBN’s suspension of dollar allocation, forcing them to source foreign exchange outside the official channels and narrowing their operating margins.
Despite the weekly depreciation, the CBN’s managed float regime, supported by growing external reserves, has helped prevent the heightened, sudden volatility seen in previous months. However, the slight weakening reflects a cautious outlook driven by global headwinds and the persistent domestic shortfall in FX supply.
Do you think the CBN should increase its FX market intervention using the growing reserves, or should it prioritize demand management and wait for export earnings to naturally boost supply?
