The Central Bank of Nigeria (CBN) has increased FX liquidity, leading to a temporary reduction in dollar demand and allowing the naira to appreciate by 0.95% in the parallel market on Monday. The naira had previously faced a significant depreciation in the official market, dropping by 1.3% to N1,537.50/$1. It also reached a new low of N1,590 in the parallel market, marking its lowest level since February 2024. However, following the CBN’s intervention, the naira improved to N1,575, reflecting a N15 gain compared to the previous week.
Traders noted that demand for dollars from end users had moderated, with the market experiencing a sense of calm after recent volatility. Analysts at Afrinvest Securities Limited attributed the previous depreciation to a renewed dollar demand-supply imbalance. The CBN’s increased liquidity appears to have temporarily alleviated some pressure on the naira, although analysts continue to monitor the market closely for any signs of instability.
In addition to the improvements in the parallel market, Nigeria’s FX reserves also saw a boost, rising by $12.06 million to reach $38.36 billion as of March 12, 2025. This marks the first increase after a nine-week decline in reserves. Despite this positive development, experts have cautioned that the naira’s ability to maintain its appreciation will depend on several factors, including consistent policy enforcement and favorable external economic conditions.
Looking ahead, analysts from Cordros Research expressed concerns over the impact of lower oil prices on Nigeria’s oil receipts, which could reduce FX inflows and continue to pressure the naira. However, the CBN’s sustained market interventions and efforts to minimize market distortions are expected to prevent a sharp depreciation. The CBN’s Business Expectation Survey suggests that, with increasing business activity and confidence in Nigeria’s macroeconomic outlook, the naira may continue its gradual appreciation in the coming months.
source: the sun