Naira Strengthens Amid CBN Intervention, FPI Inflows and Eased Inflation

The Nigerian naira appreciated slightly at the official foreign exchange window in the past week, moving to ₦1,547/$ from ₦1,549/$, driven primarily by interventions from the Central Bank of Nigeria (CBN). The CBN injected U.S. dollars into the market to relieve corporate demand pressures, which, alongside inflows from foreign portfolio investors (FPIs), contributed to the currency’s resilience. FPIs reportedly entered the market to participate in the CBN’s Open Market Operations (OMO) auction.

The CBN conducted a significant OMO auction, offering ₦600 billion across 155-day and 204-day tenors, but ended up allotting ₦1.07 trillion due to strong investor demand. The stop rates were 24.20% and 24.59% respectively. This intervention is part of the central bank’s ongoing strategy to mop up excess liquidity in the financial system and stabilize the naira.

Despite the official market gains, the naira depreciated slightly in the black market to ₦1,585/$. Analysts from Cowry Asset Management and Cordros Capital anticipate that the naira will maintain relative stability in the coming week, underpinned by CBN support and continued foreign exchange reforms. However, they warned of external risks, such as global economic pressures and heightened tensions in the Middle East, which have driven oil prices up—an indirect benefit for Nigeria’s oil-dependent economy.

Meanwhile, Nigeria’s foreign reserves declined further to $37.71 billion, according to the CBN’s latest update. While the naira showed resilience, the decline in reserves points to the cost of sustained interventions by the central bank, possibly indicating that maintaining this trend might be challenging without increased inflows from exports or investments.

On a more optimistic note, inflation has eased to 22.97% in May. In response, the Minister of Finance, Wale Edun, met with CBN Governor Olayemi Cardoso to strengthen coordination between fiscal and monetary policy. The meeting focused on sustaining economic momentum, controlling inflation, and enhancing investor confidence—all seen as vital steps toward long-term, private sector-driven growth in Nigeria.

Source: Punch