Naira Slips 0.7% in Official Market as FX Pressures Persist

The naira weakened against the dollar last week, falling 0.7 percent in the official foreign exchange market to close at N1,371.04 per dollar.

In the parallel market, the local currency also dropped, shedding 36 basis points to close at N1,370.13 per dollar. The move closed the arbitrage gap between the two markets.

The depreciation comes as businesses and manufacturers struggle with high import costs, elevated production expenses, and limited access to foreign exchange. Analysts said these factors are worsening inflationary pressures and weakening investor confidence in the broader economy.

Nigeria’s external reserves rose marginally by 0.19 percent to $48.54 billion during the week. But analysts said the increase remains too small to significantly strengthen market liquidity or ease pressure on the naira. Persistent demand from importers, manufacturers, airlines, and other market participants continues to drain available FX.

Financial analysts said the naira will keep facing structural challenges. These include inadequate dollar inflows, weak capital importation, declining foreign portfolio investment, and continued dependence on oil receipts for external earnings.

In the global oil market, crude prices surged strongly during the week. Escalating geopolitical tensions involving Iran and growing fears of supply disruptions in the Middle East drove the rally.

Brent crude was on track for a weekly gain of nearly six percent. President Donald Trump’s comments signalled increasing impatience with Iran, despite reports that about 30 vessels had recently passed through the Strait of Hormuz, one of the world’s most strategic oil shipping routes.

At the close of trading, Brent crude advanced 3.24 percent to $109.2 per barrel. The United States West Texas Intermediate gained 3.73 percent to settle at $104.9 per barrel. Nigeria’s Bonny Light crude also posted strong gains, rising 5.99 percent to close at $116.99 per barrel.

Analysts said the rise in crude oil prices offers temporary support for Nigeria’s fiscal position and external reserves through improved export earnings and increased foreign exchange inflows. However, they warned that the gains remain highly vulnerable to geopolitical shocks, global demand uncertainties, and fluctuations in international energy markets.

They added that despite stronger oil prices, the naira could remain under pressure in the near term. FX demand continues to outpace supply in the official market, while confidence in the currency remains weak.

Meanwhile, bearish sentiment persisted across Nigeria’s fixed-income market. The secondary bond market extended its losses amid weak investor demand and increased selloffs across most maturities. Trading activity remained subdued throughout the week as investors adopted a cautious approach in response to inflation concerns, liquidity pressure, and uncertainty surrounding future monetary policy direction.