Naira Slips at Official Market as Dollar Demand Outpaces Supply
By Aboki Forex —
The naira recorded a marginal decline against the United States dollar at the official foreign exchange market on Friday. Demand for foreign currency outpaced available liquidity.
Data from the Central Bank of Nigeria (CBN) showed the local currency closed at N1,362.21/$ at the Nigerian Foreign Exchange Market (NFEM). That compares with N1,358.75/$ recorded in the previous trading session.
The depreciation came amid a significant drop in trading activity. Tighter foreign exchange liquidity conditions weighed on the market. According to the CBN’s daily market report, exchange rates traded within a band of N1,360 and N1,366 to the dollar. That underscores continued pressure on the local currency.
Market turnover also declined sharply. The total value of transactions fell by more than 37 percent. A total of $73.57 million was traded across 90 deals on Friday. That is down from $128.17 million exchanged in the preceding session.
Analysts attributed the softer performance of the naira partly to reduced dollar inflows from foreign portfolio investors. Their participation in the domestic money market remained subdued. The absence of recent Open Market Operations (OMO) auctions also limited investor demand for naira-denominated assets. That contributed to weaker support for the local currency.
External Reserves Hit Fresh High
Despite the pressure in the foreign exchange market, Nigeria’s external reserve position continued to strengthen. Inflows from crude oil earnings, diaspora remittances and other foreign exchange sources provided support. Latest reserve data indicated that the country’s gross external reserves surpassed the $50 billion mark. That is the highest level recorded since the implementation of the foreign exchange reforms.
Financial market analysts said the reserve build-up reflects improved foreign exchange inflows and stronger external buffers. They noted that, barring significant debt service obligations in the near term, the reserves could rise further and approach $51 billion before the end of June.
The improvement in external reserves is expected to enhance the CBN’s capacity to support exchange rate stability. It should also bolster investor confidence in the country’s foreign exchange market.