The naira closed last week with a mixed performance across different markets, recording a slight depreciation at the official exchange window while appreciating on the parallel (black) market.
According to data published on the Central Bank of Nigeria (CBN) website, the naira settled at N1,532/$1 on Friday, marginally weaker than Thursday’s closing rate of N1,531/$1. The local currency had opened the week at N1,529.5/$1 on Monday, slipped to N1,530/$1 on Tuesday, and briefly strengthened to N1,520/$1 by Wednesday.
Overall, the official market saw a slight week-on-week decline from N1,528.5/$1 recorded the previous week to N1,532/$1 last week.
Meanwhile, the naira strengthened on the parallel market, closing at N1,550/$1 on Friday, an improvement from Thursday’s N1,555/$1. From Monday through Wednesday, the currency remained steady at around N1,560/$1, based on market surveillance data gathered by Nairametrics across Lagos.
This marks a notable gain compared to the previous week, when the naira ended at N1,580/$1, suggesting reduced pressure on the black market and growing confidence in the local currency.
Foreign Reserves Inch Up
Supporting the naira’s resilience, Nigeria’s foreign reserves rose to $37.3 billion as of Wednesday, up from $37.28 billion on Tuesday and $37.127 billion on Monday, according to CBN data.
Analysts attribute this positive trend partly to global dollar weakness. In an interview with Nairametrics on Friday, Dr. Nasir Aminu, a Senior Lecturer in Economics and Finance at Cardiff Metropolitan University, explained,
“The naira hasn’t been volatile in the last few months, largely because America’s dollar has been shrinking. It shrunk by about 15% this year, which tells you a lot about Nigeria’s currency trajectory as well.”
Additionally, a significant drop in dollar demand by businesses has helped ease pressure on the currency. Many import-reliant businesses have shifted toward local inputs, reducing the need for foreign exchange.
Banking sources who spoke to Nairametrics noted a noticeable improvement in dollar liquidity within the system.
“There is hardly any bank branch you go to now where dollars aren’t readily available if you want to buy,” a senior bank official remarked.
Regulatory Changes Shaping the Forex Market
In a related development, Bureau De Change (BDC) operators in Nigeria are bracing for mergers, acquisitions, and possible takeovers following new CBN regulations. In May 2024, the CBN raised the minimum share capital for Tier 1 BDC licenses to N2 billion and N500 million for Tier 2, a significant jump from the previous N35 million general license requirement.
The Association of Bureau De Change Operators of Nigeria (ABCON) hinted that operators may consolidate to meet these new thresholds, aimed at sanitizing the forex market and curbing speculative activities.
Looking Ahead
While the official market experienced mild depreciation, the strengthening of the naira on the parallel market and rising foreign reserves point to gradual improvements in Nigeria’s external sector. Analysts say sustained policy reforms and improving dollar supply dynamics will be key to maintaining stability in the coming months.
