The naira closed the week on a weaker note as pressure in the foreign exchange market pushed the currency down to ₦1,456.72 per dollar at the official window, marking a 0.99% decline from the previous week. At the parallel market, the currency also struggled, trading between ₦1,470 and ₦1,475 per dollar, reflecting wider demand pressures and tight supply.
Market analysts at Cowry Assets Management noted that the naira traded within a wider band during the week, fluctuating between ₦1,440 and ₦1,460, with softer foreign inflows unable to match stronger dollar demand. By Friday, the currency had weakened by nearly 1%, mirroring a similar slip in the parallel market, where the naira closed at ₦1,475. AIICO Capital also observed that strong early demand from investors seeking to cover positions kept the market bearish throughout the week.
Despite the ongoing volatility, Nigeria’s external reserves continued their steady rise, reaching $44.19bn as of Thursday—an increase of 1.26% from mid-November. Cowry Assets attributed the reserve build-up to stable oil revenue, improved non-oil inflows, and a sustained trade surplus, all of which helped the Central Bank of Nigeria maintain macro-liquidity and support market stability.
Looking ahead, market watchers expect the FX market to adopt a cautious but steady tone. Analysts suggest that pricing is being shaped more by limited supply than by shifts in investor sentiment. While the naira may continue to feel pressure when inflows slow, the growing reserves and ongoing CBN interventions are expected to help cushion volatility in the near term.
Investment houses including AIICO Capital and Afrinvest maintain a cautiously optimistic outlook. They project that the naira will likely trade within a similar band next week, supported by stronger reserves and relatively bullish fundamentals. Afrinvest also links recent currency stability—Nigeria’s sixth straight month of appreciation—to the country’s disinflation trend. However, it warns that sustained stability will depend on how the government navigates investor concerns ahead of new capital gains tax rules coming into effect in 2026, as well as the outcome of the upcoming Monetary Policy Committee meeting, where a modest rate cut of 25–50 bps is anticipated.
source: punch