Why naira fell across all markets despite high dollar trading volume

Nigeria's naira weakened across all foreign exchange markets on Monday. Growing demand for dollars and reduced foreign portfolio inflows piled pressure on the currency.

Data from the Central Bank of Nigeria (CBN) showed the naira depreciated by about 0.20 per cent at the Nigerian Foreign Exchange Market (NFEM). It closed at N1,383.63 per US dollar, down from N1,380.93 recorded at the end of last week's trading session.

This decline comes as foreign investors exit Nigeria's financial markets. The exits raise concerns over sustained pressure on the country's foreign exchange reserves and liquidity.

According to the CBN's daily FX report, transactions at the official market were executed within a range of N1,377.50 to N1,390 per dollar. Demand for foreign currency continued to outpace supply.

Trading activity improved significantly. Interbank turnover at the NFEM surged by more than 80 per cent to $223.94 million on Monday from $124.22 million on Friday. The sharp increase suggests commercial banks processed more international payment requests for customers.

But stronger liquidity failed to halt the naira's decline. Hard currency shortages continued to weigh on the market.

Market analysts said the absence of fresh CBN intervention means pressure on the naira is likely to persist. Foreign exchange inflows into the official window remain subdued.

Analysts attributed the growing pressure to weakening foreign portfolio investment. This is partly driven by expectations that the US Federal Reserve will maintain a hawkish monetary policy stance. Higher US interest rates typically make emerging market assets less attractive, prompting investors to move capital into safer dollar-denominated investments.

Economists also pointed to increasing political uncertainty ahead of Nigeria's 2027 elections. This is encouraging foreign investors to pull back.