Naira Holds Firm Despite Dip in FX Inflows: Analysts Cite Strong Reserve Build-Up, Investor Sentiment

The Nigerian naira maintained its stability despite a recent decline in foreign exchange (FX) inflows, according to market data and analysts’ reports. On Monday, the naira appreciated slightly at the Nigerian Foreign Exchange Market (NFEM), closing at N1,531.95 per dollar—up from Friday’s N1,533.74. In the parallel market, however, the currency remained unchanged at N1,560 per dollar, following earlier pressure that saw it fall from N1,530.

FX inflows into Nigeria declined for the second week, dropping to $791.10 million from $979.10 million, as revealed by Coronation Merchant Bank. Foreign portfolio investors remained the largest international contributors, accounting for $60.90 million or 7.70 percent. Other international sources contributed a negligible 0.76 percent. However, domestic sources picked up the slack, with non-bank corporates contributing $483.60 million (61.13 percent), while exporters and importers added $168.60 million (21.31 percent).

Despite weaker inflows, the naira showed modest gains in the official market last week, supported by a positive macroeconomic outlook. The IMF’s upward revision of Nigeria’s economic growth helped buoy investor sentiment. The currency appreciated 0.06 percent at the Nigerian Autonomous Foreign Exchange Market (NAFEM), moving from N1,534.72 to N1,533.74 per dollar. Meanwhile, the parallel market rate stayed at N1,540, leaving the spread with the official rate at just 0.41 percent.

Adding to the market’s stability, Nigeria’s external reserves continued to strengthen, increasing by $726.80 million (1.88 percent) to reach $39.36 billion as of Wednesday. This marks the fourth straight week of reserve growth, offering some buffer against external shocks and supporting confidence in the naira’s resilience amid fluctuating inflow patterns.

Looking ahead, analysts project that the FX market will likely remain within the N1,500 to N1,600 range, driven by steady reserve accretion and improved economic sentiment. However, they warn that without a significant rebound in FX inflows—particularly from foreign sources—further appreciation of the naira may be limited, leaving the market sensitive to changes in investor behavior and global conditions.

Source: Business day