Naira slips to N1,329.15/$ as dollar demand rises and reserves hit $54.607bn

The naira weakened to N1,329.15 per dollar at the official foreign exchange market as renewed demand for international payments pressured the currency, even as liquidity in the market improved sharply.

Data from the Nigerian Foreign Exchange Market (NFEM) showed the naira closed at N1,329.15/$, compared with N1,326.30/$ in the previous session. That is a depreciation of N2.85, or about 0.21%.

Wider trading band, stronger turnover

The dollar traded within a relatively wide range during the session, with transactions completed between N1,326/$ and N1,333.50/$. The upper end of that range pointed to pockets of demand pressure as businesses, banks and other market participants sought foreign currency to meet international obligations.

Trading activity, however, picked up significantly. According to the Central Bank of Nigeria's daily foreign exchange update, interbank FX turnover jumped by more than 174% to $262.12 million, from $95.61 million a day earlier. The number of interbank transactions also rose to 172 deals, compared with 109 previously.

The rise in turnover suggests improved dollar availability even as the currency lost ground.

Parallel market moves the other way

The picture was different on the parallel market, where the naira strengthened to about N1,370 per dollar. That is a gain of N10 from the previously reported rate of N1,380/$.

The contrasting movements narrowed the gap between the official and parallel-market rates, a key indicator watched by businesses and investors assessing Nigeria's foreign exchange market.

FX analysts believe the CBN's recent interventions and broader market reforms are helping to contain sharp currency swings, although demand for dollars remains a major factor.

Analysts at Herwood Securities Limited said the forex market could remain relatively stable in the near term, with movements largely determined by available liquidity and demand conditions. The firm said the naira could continue to record modest fluctuations as market participants react to prevailing supply and demand dynamics.

Reserves at highest level since 2008

Providing an additional buffer, Nigeria's gross external reserves climbed to $54.607 billion, supported partly by stronger hydrocarbon revenues. The level is the highest recorded since 2008 and could strengthen the CBN's capacity to support liquidity in the FX market when necessary, according to a report by MarketForces Africa.

For businesses and households, the immediate focus remains on whether increased dollar supply can consistently match demand.

With official turnover rising sharply and reserves strengthening, traders will be watching upcoming sessions to see whether the naira can recover from its latest decline or face renewed pressure.

The naira had strengthened earlier in the official market after the CBN injected fresh dollar liquidity into the system, appreciating to N1,328.2154/$ at the NFEM from N1,329.2129/$ in the previous session.

For importers and businesses sourcing dollars for obligations, the near-term outlook hinges on whether the CBN can keep supply steady enough to prevent the kind of demand-driven slides that pushed the rate higher this week.