The Nigerian naira extended its rally last week, closing at ₦1,465 per U.S. dollar at the official market, buoyed by improved foreign exchange inflows and a weaker dollar following disappointing U.S. economic data and political uncertainty from a partial government shutdown. The increased dollar supply helped ease pressure on demand, providing a much-needed boost to Nigeria’s foreign exchange market after months of volatility.
In the parallel market, the local currency also strengthened by 3.8 per cent week-on-week to ₦1,460 per dollar, narrowing the gap between official and black-market rates to ₦5.68 from ₦34.34 previously. Analysts say the reduced spread signals waning speculative activity and growing confidence in the official FX market. According to AIICO Capital, the improved liquidity came largely from offshore investors and International Money Transfer Operators (IMTOs), who injected fresh inflows into the system.
AIICO Capital’s weekly report noted that the market opened with strong dollar supply, driving rates down to ₦1,475.35 per dollar early in the week. Midweek interventions by the Central Bank of Nigeria (CBN) and steady inflows kept rates stable within the ₦1,445–₦1,468 range, reducing volatility. By Friday, the naira closed stronger at ₦1,465.68 per dollar, reflecting a 101-basis-point improvement week-on-week.
Interestingly, the naira’s resilience persisted despite declining global oil prices. Brent crude fell 8.3 per cent week-to-date to $64.53 per barrel, while Nigeria’s Bonny Light dropped 4.66 per cent to $69.94. Analysts view this as a sign that the naira may be gradually decoupling from oil price movements—a positive shift for an economy long tied to crude revenue. However, the slump in oil prices, coupled with OPEC+’s decision to increase output by 137,000 barrels per day in November, could still pose fiscal challenges for Nigeria in the medium term.
Looking ahead, analysts remain cautiously optimistic. Cowry Asset Management and AIICO Capital forecast that the naira will sustain its stability, supported by consistent FX inflows, CBN interventions, and a weaker dollar environment. Still, they warn that prolonged weakness in oil prices could weigh on Nigeria’s reserves and government revenue. Meanwhile, the country’s external reserves rose for the twelfth consecutive week, gaining $150.99 million to reach $42.41 billion as of October 2—an encouraging sign of recovery and investor confidence.
source: punch