Nigeria’s Naira Weakens Amid Expanding FX Gap and Rising Reserves to $54.92 Billion

Nigeria’s Naira Weakens Amid Expanding FX Gap and Rising Reserves to $54.92 Billion

The Nigerian naira depreciated to N1,330.10 at the official exchange rate, up from N1,329.16, as demand for the U.S. dollar pressured liquidity in the foreign exchange market. The spot rate was N1,329.51 at the start of the week.

In the informal market, the naira fell 13.50% to N1,555.00, widening the gap between official and parallel rates to approximately N225 from N41, according to AIICO Capital Limited.

MarketForces Africa’s channel checks revealed that some fintech platforms quoted the exchange rate at N1,362 on Friday, with several vendors selling U.S. dollars at that rate or higher.

Recently, the naira has experienced upward movements, reflecting improved liquidity in the foreign exchange market. Robust dollar supply meeting demand led to an approximate N3.80 appreciation per dollar in September, driven by increased foreign interest in the economy.

Credit rating upgrades have enhanced Nigeria’s risk profile, attracting foreign capital inflows as investors seek higher yields on naira-denominated assets.

The naira strengthened against the British pound, closing at N1,759.58, and the euro settled at N1,496.76 in the official window, as reported by AIICO Capital.

In the parallel market, the naira depreciated to N2,010 against the pound and N1,650 against the euro, according to AIICO Capital’s report.

Meanwhile, Nigeria’s external reserves rose 0.07% week-on-week to U.S. $54.92 billion. Cowry Asset Limited noted that this reserve accumulation bolsters the external sector and supports confidence in the naira.

Stability in the naira’s value will continue to depend on foreign exchange inflows, market liquidity, and the balance between dollar demand and supply, Cowry stated.

Globally, crude prices were trending lower for the week as a rebound in oil flows from the Persian Gulf offset concerns over U.S. troop deployments and China’s fuel export halt. Brent crude traded at U.S. $99.84 per barrel, while WTI stood at U.S. $92.62, after strong September gains but moderating at the start of October.

In the domestic market, Bonny Light crude fell by 3.83% during the week, suggesting some moderation in local crude pricing despite elevated international benchmarks.

Cowry Asset Limited projects that the naira will remain relatively stable in the near term, supported by improved external reserves and narrowing exchange-rate differentials.

Market participants anticipate that fluctuations in crude oil prices and developments in the Persian Gulf could influence foreign exchange liquidity and sentiment.

Analysts anticipate that a prolonged decline in oil prices might impact Nigeria’s external inflows, whereas renewed geopolitical tensions could support crude prices and, consequently, the naira.

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