Naira Weakens Amid Liquidity Constraints in Foreign Exchange Markets

Naira Weakens Amid Liquidity Constraints in Foreign Exchange Markets

The Nigerian naira experienced depreciation against the US dollar in foreign exchange markets following the Central Bank’s reduction of its benchmark interest rate.

According to CBN data, the naira closed at N1,328.50 at the Nigerian Foreign Exchange Market (NFEM), a marginal 0.05% increase from the prior day.

In the parallel market, the naira fell 0.51% to N1,387 per dollar, indicating a FX liquidity shortage amid heightened demand for foreign currency.

The exchange rate spread widened to N59 from N52 the previous day, reflecting increased volatility between official and unofficial rates.

Conversely, the naira strengthened against other currencies at the official window, settling at N1,762.92 per pound and N1,514.89 per euro.

External reserves grew further, reaching $54.808 billion as the economy continues absorbing FX amid rising global oil prices. Brent crude surged over $100 per barrel, while elevated US Treasury yields pressured emerging-market debt.

Optimism around US-Iran diplomatic talks reduced demand for safe-haven assets, causing gold to drop 0.84% to $4,327.15 per ounce, a 0.69% year-to-date decline.

Geopolitical tensions in the Strait of Hormuz lifted Brent 2.16% to $102.54, marking a 68.51% year-to-date gain. These gains were tempered by Saudi Arabia’s pipeline restart plans and progress in US-Iran negotiations. South Africa’s 10-Year Bond Yield rose slightly to 8.83%.

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