Naira Depreciates Further as Nigeria's External Reserves Surge to $48.5 Billion
Nigeria's currency, the naira, weakened again at the official foreign exchange window, even as the country's external reserves climbed to their highest level in years. According to data from the Central Bank of Nigeria (CBN), the naira depreciated by 0.24 per cent at the Nigerian Foreign Exchange Market (NFEM), closing at ₦1,341.35 per dollar. This decline marked the second consecutive day of losses at the official window, reflecting mounting demand for foreign currency among eligible market participants.
Rising Demand Outpaces Dollar Supply
At the Nigerian Foreign Exchange Market, the spot rate settled around ₦1,341 per dollar as requests for foreign payments outpaced available dollar supply. Market watchers attributed the pressure largely to increased offshore obligations and corporate demand, combined with the absence of strong foreign exchange intervention from the apex bank. Analysts noted that the imbalance between demand and supply at the official segment remains a key factor driving the currency's slide.
The CBN data showed that while dollar inflows into the system have improved, they have not been sufficient to cover growing foreign payment requests in recent sessions. The reduced presence of direct intervention by monetary authorities has further exposed the market to demand pressures. Without sizeable injections to stabilise liquidity, the naira has been left to adjust more freely in response to underlying market forces.
Interestingly, conditions differed at the parallel market, where the local currency appreciated by 1.86 per cent to ₦1,336 per dollar. This divergence between the official and informal segments highlights the complex dynamics shaping Nigeria's foreign exchange landscape, with liquidity patterns varying across markets.
External Reserves Hit $48.5 Billion
Despite the weaker currency, Nigeria's gross external reserves surged past $48 billion, reaching $48.5 billion, according to fresh figures from the Central Bank. This level represents the highest reserve position in about eight years. The stronger reserve buffer has been supported by improved foreign inflows, including oil earnings and other external receipts.
Economists believe the rising stockpile enhances the country's capacity to defend the naira, meet external obligations, and stabilise investor confidence. Some analysts project further gains in reserves in the coming months, driven by expectations of stronger oil receipts and a possible moderation in petroleum import payments.
Oil Prices Add Global Uncertainty
Developments in the global oil market are also influencing Nigeria's outlook. Crude prices recently climbed amid renewed geopolitical tension surrounding negotiations over Iran's nuclear programme. Although talks between the United States and Iran are expected to continue, the lack of tangible progress has fueled concerns about potential supply disruptions.
Brent crude settled around $69 per barrel, while West Texas Intermediate hovered near $65 per barrel. Higher oil prices generally bode well for Nigeria's revenue and reserve accumulation, given the country's dependence on crude exports. However, the current episode underscores a critical reality: stronger reserves alone may not immediately translate into a firmer currency.
As long as foreign exchange demand continues to outweigh supply at the official window, the naira could remain under pressure, even in the face of historically robust external buffers. This situation highlights the ongoing challenges in Nigeria's economic landscape, where currency stability is influenced by both domestic market forces and global oil price fluctuations.
