The naira struggled at the official window in the past week, shedding 1.25 per cent week-on-week to settle at 1536.89/$ on Friday.
According to data from the Central Bank of Nigeria, the Nigerian currency started the week on a weak note at 1,528.03/$, down from 1,517.93/$ in the previous trading session. The naira depreciated further to 1532.93/$ before regaining some strength on Wednesday and Thursday. However, by Friday, it had fallen to 1536.89/$1.
The depreciation occurred amid reports that negotiations on the naira-for-crude agreement between the Nigerian National Petroleum Corporation Limited and local refineries had stalled. However, the parties involved are set to return to the dialogue table this week to sort out their differences with the possibility of extending the contract.
Dangote Petroleum Refinery has already temporarily halted petroleum product sales in naira, citing a currency mismatch. Industry experts and oil marketers warned that the halt in naira sales by the refinery could increase pressure on the foreign exchange market, as dealers would now have to source large amounts of US dollars to purchase petroleum products.
The naira has also continued to struggle despite efforts by the CBN to boost FX supply to banks and Bureaux De Change. However, analysts caution that these interventions may only provide temporary relief without structural reforms to address Nigeria’s prolonged FX challenges.
“Looking ahead, we anticipate a mixed outlook for the naira as demand pressures for the greenback intensify, with FX users and speculators continuing to exploit arbitrage opportunities. Nevertheless, we expect the CBN to sustain its weekly interventions to stabilise the local currency,” experts at Cowry Assets Management Limited said.
At the parallel market, the local currency gained N12 against the dollar, appreciating by 0.77 per cent week-on-week to close at an average of N1,568 per dollar.
Researchers at Afrinvest reported that the naira closed at 1565/$ in the parallel market. For its weekly outlook, Afrinvest projected a stable naira, “underpinned by continued CBN intervention.”
Meanwhile, CBN foreign reserves declined by 0.06 per cent from $38.37bn to $38.35bn as of Thursday. Researchers at Cowry Assets Management attributed the decline to the CBN’s continued efforts to defend the local currency amid minimal foreign exchange inflows into the economy.
Over the weekend, analysts noted that foreign portfolio investors’ participation in the FX market remains subdued, partly due to concerns over oil receipts amid lower oil prices.
As an oil-producing nation, Nigeria remains vulnerable to external shocks, including geopolitical tensions that influence oil supply and pricing.
In the past week, the benchmark Brent crude oil price advanced by 3.0 per cent week-on-week to settle at approximately $85.00/bbl, according to Reuters. The rise was driven by supply concerns following fresh US economic sanctions against Iran, aimed at curbing nuclear weapon development. Additionally, OPEC+ reaffirmed its commitment to production cuts until June 2026 to stabilise global oil markets, after some member nations had been exceeding their agreed quotas.
With Nigeria’s heavy reliance on oil revenue to support FX reserves, these developments will likely have a direct impact on foreign exchange inflows and the stability of the naira in the near term.