After weeks of continuous depreciation, the naira showed slight recovery following an intervention by the Central Bank of Nigeria (CBN) in the foreign exchange (FX) market. On Friday, the naira appreciated by 36 basis points to close at N1,509.70 per dollar at the Nigerian Foreign Exchange Market (NFEM), according to data from the FMDQ platform......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
Analysts explained that the CBN’s decision to inject more dollars into the market improved liquidity, helping to stabilize the local currency. During the trading session, foreign exchange transactions took place between N1,480.00 and N1,522.00 per dollar at the official window.
To boost dollar availability, the CBN sold approximately $66.45 million to authorized banks, which helped ease the pressure on the forex market. Despite this intervention, demand for the US dollar remains high, putting pressure on Nigeria’s foreign reserves. Over the past week, the country’s gross external reserves dropped by $307.19 million, bringing the total to $39.10 billion.
In the forex forwards market, the naira weakened across different contract periods. The 1-month forward rate fell by 0.3% to N1,554.01 per dollar, while the 3-month forward contract dropped by 0.6% to N1,633.36. Similarly, the 6-month forward contract declined by 1.0% to N1,749.31, and the 1-year forward contract depreciated by 1.1% to N1,948.97, according to Cordros Capital Limited.
However, in the parallel market, the naira appreciated slightly, gaining N5 to settle at N1,555 per dollar. This led to a reduction in the gap between the official and black-market exchange rates, narrowing the spread to 3.33% from 4.22% the previous week, according to TrustBanc Financial Group Limited.
Looking ahead, financial analysts predict that forex market liquidity will remain stable, supported by increased inflows from foreign portfolio investors (FPIs) who are attracted to Nigeria’s high-interest rate environment. However, global economic uncertainties, including trade tensions and US policies, could pose risks to the naira’s stability.
“We expect the CBN to continue intervening in the forex market, especially during periods of liquidity shortages, to keep the exchange rate relatively stable,” Cordros Capital Limited noted in its report.