Naira Slumps Amid Tightening Dollar Supply in Forex Market
The Nigerian naira slipped to N1,346.7945 per dollar in the official foreign‑exchange market, reflecting a persistent liquidity shortage and rising demand for hard currency.
Pressure intensified on the forex market as the U.S. Dollar Index (DXY) rose amid evolving global market dynamics.
Supply of U.S. dollars from foreign portfolio investors, non‑bank corporate entities, and the Central Bank fell short of the amount required to support appreciation of the local currency.
Investors balanced the rise in crude oil prices against worries that reduced investment in artificial‑intelligence‑related sectors might curb U.S. economic growth.
At the official foreign‑exchange window, the naira weakened marginally by 0.04% week‑on‑week, ending at N1,346.79 per dollar, up from N1,346.26 the prior week.
The parallel market showed stronger pressure as sustained demand for the greenback—partly due to seasonal foreign‑exchange needs—suppressed the local currency, causing the naira to drop 1.79% to an average of N1,394 per dollar, up from N1,369 the previous week.
Globally, crude oil prices fell sharply, with Brent briefly slipping to $90 per barrel on Friday—the steepest weekly decline since mid‑April—as optimism about a Middle‑East diplomatic resolution encouraged traders to unwind geopolitical premiums.
Brent traded at $97.46 per barrel, WTI at $90.14 per barrel; Nigeria’s Bonny Light crude fell 10.45% to $106.90 per barrel, down from $119.37 a week earlier.
Cowry Asset Management Limited analysts warned that continued declines in domestic crude benchmarks may dampen near‑term foreign‑exchange inflows.
In the meantime, Nigeria’s gross foreign‑exchange reserves fell marginally by 0.16% to $55.13 billion, down from $55.22 billion a week earlier.
We anticipate the naira will remain within a relatively stable band, bolstered by ongoing Central Bank interventions and liquidity support at the official foreign‑exchange window.
Nevertheless, persistent foreign‑currency demand, seasonal payment obligations, and fluctuations in the U.S. dollar could curb near‑term appreciation, while crude oil prices and the flow of foreign‑exchange inflows will continue to be pivotal to exchange‑rate stability,” Cowry Asset Limited noted.
The U.S. dollar index surged on Friday, on track for its largest daily percentage gain in seven weeks after a stronger‑than‑expected payrolls report.
The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.63% to 102.12, while the euro fell 0.55% to $1.1157. The dollar is on pace for its biggest daily percentage gain since September 16, and the euro is approaching its largest one‑day decline since October 7.
Optimism that the Federal Reserve would raise rates next month had receded as U.S. equities tumbled, erasing roughly $3 trillion from the S&P 500 and prompting the Nasdaq to record its steepest one‑day percentage decline in 19 months amid concerns that stricter government AI regulations after the midterm elections could curb economic growth.
Expectations that the Fed would hike next month had fallen as U.S. equities plummeted, with the S&P 500 wiping out about $3 trillion in market value while the Nasdaq suffered its biggest one-day percentage drop in 19 months on fears that tougher government regulations on the AI buildout after the U.S. midterm elections would stunt economic growth.
