CBN FX Intervention Steadies Naira as Currency Holds Firm in June Despite Global Headwinds
By Aboki Forex —
The Central Bank of Nigeria’s (CBN) sustained foreign exchange market interventions and broader reform measures helped the naira remain largely stable in June despite weaker dollar liquidity, geopolitical uncertainties and persistent demand pressures. The naira closed June at N1,379.00 per dollar in the official market, representing a slight month-on-month depreciation of 0.3 per cent from N1,376.00/$ recorded in May.
Liquidity Drops but Naira Holds Ground
Total foreign exchange supply fell by 26 per cent month-on-month to $2.8 billion, reflecting lower inflows from both domestic and foreign market participants. The decline in liquidity was driven by softer foreign portfolio inflows and the maturity of a sizeable Open Market Operations (OMO) private placement. Analysts noted that geopolitical tensions in the Middle East continued to dampen investor appetite for emerging and frontier markets, reducing capital flows into several developing economies, including Nigeria. Foreign Portfolio Investors (FPIs) remained cautious as global investors sought safer assets.
Further tightening liquidity conditions was the maturity of an estimated $1.3 billion OMO private placement during June. Market sources indicated that the instrument was not rolled over, resulting in a sizeable liquidity outflow that temporarily reduced dollar availability within the financial system.
CBN Steps In with $320 Million Injection
To ease liquidity constraints and improve dollar availability, the apex bank injected approximately $320 million into the foreign exchange market during the month. The intervention helped cushion the impact of weaker inflows, improved market confidence and ensured that exchange rate movements remained orderly. Analysts said the CBN’s continued willingness to support the market has become an important confidence-building mechanism for both local and foreign investors.
On an average exchange rate basis, the naira actually appreciated to N1,368.14 per dollar from N1,370.16 per dollar recorded in the previous month. This indicates that market conditions remained generally stable despite the mild depreciation recorded at the month-end closing rate.
Parallel Market Gap Narrows
The relative stability of the official market contrasted with developments in the parallel market, where the naira weakened by 1.1 per cent to close at N1,405 per dollar. Analysts attributed the wider movement in the parallel segment to continued supply shortages outside the formal market and sustained retail demand. However, they noted that the relatively narrow gap between the official and parallel market rates reflects progress made under the CBN’s foreign exchange reforms aimed at improving price discovery and reducing distortions.
Since embarking on comprehensive FX reforms, the CBN has focused on improving transparency, enhancing liquidity, attracting foreign capital and restoring confidence. Nigeria’s external reserves have remained at relatively comfortable levels, providing the CBN with sufficient firepower to intervene whenever temporary liquidity shortages threaten market stability.
What This Means for the Naira and Nigerian Businesses
The resilience displayed by the naira in June shows that domestic policy measures are increasingly offsetting external shocks. Unlike previous episodes when similar declines in FX inflows triggered sharp currency depreciation, the current market structure has proved more resilient owing to improved liquidity management and greater policy coordination. For Nigerian businesses, this relative stability reduces the risk of sudden input cost spikes and supports better planning, though sustained foreign capital inflows remain critical to maintaining the momentum.