The naira rallies across foreign exchange markets on Monday as the Central Bank of Nigeria (CBN) strengthens the US dollar supply with $250 million amidst a 15% FX inflows reduction.
Forex market liquidity suffered a pullback which cost the naira N3 per dollar transaction last week, with data showing that the supply side weakened.
The CBN sold $250 million to authorised dealer banks at the official window cumulatively as foreign portfolio investors, exporters and non-bank corporate supply dripped.
The carryover effect of the FX boost impacted trading activities in the currency market on Monday, and the naira appreciated by 0.18% to ₦1,451.82/$ at the official window.
The CBN FX update showed that the spot rate touched an intraday high of N1455, as against N1458.5000 in the previous trading session’s quote. During the trading session, FX rate touched intraday low of N1450 as pressure eased.
In the parallel market, the naira rose to ₦1,477/$, reflecting improved currency sentiment and reduced pressure across both the regulated official segment and the informal foreign exchange market.
Meanwhile, there were mixed sentiments across the official and parallel markets towards Naira last week, reflected by a slight weakness in the performance of the currency.
The official rate depreciated a little by 0.28% week on week to close at N1,454.41/US$1 from N1,450.42/US$1, while the parallel market rate appreciated to settle at N1,485.00/US$ from N1,495.00/US$ in the previous week.
Consequently, the spread between both markets decreased to N30.59US$/1 from N44.57/US$1, from the previous week, research subsidiary of Coronation Merchant Bank Limited said in a report.
FX analysts said foreign exchange inflows through the Nigerian Foreign Exchange Market decreased to US$716.3 million from US$844.70 million in the previous week – a 15% drop in a week.
Foreign portfolio investors accounted for the highest share of inflows at 32.98%, followed by exporters at 30.84%, the CBN (17.36%), Non-bank Corporates (16.94%), others (0.72%) and Individuals (0.63%).
Elsewhere, Oil prices dipped last week, giving up gains accumulated over the last two weeks, with Brent falling to US$61.17 per barrel (bbl), down 4.05% on the week (-18.05% year to date), the lowest levels seen since October 2024 due to growing concerns about an oversupplied market.
Recent projections from the US Energy Information Administration reinforced these concerns. US crude output is expected to continue expanding, reaching a peak of 13.61 million barrels per day by the end of 2025, before edging slightly lower to 13.53 million barrels per day in 2026.
This supply backdrop has weighed on sentiment, particularly as non-OPEC production remains resilient. On the demand side, OPEC remains positive but cautious.
The cartel expects global oil consumption to rise by roughly 1.40mn barrels per day by 2026, with growth concentrated in non-OECD economies. However, this pickup in demand is seen by some analysts as insufficient to fully offset the volume of new supply expected to enter the market.
Meanwhile, geopolitical developments have failed to provide price support. Markets continue to track negotiations related to the Ukraine conflict, but the associated risk premium has diminished.
Likewise, the recent US seizure of a Venezuelan oil tanker triggered little reaction in prices, showing how dominant the supply fundamentals narrative is currently, as similar events would typically have pushed crude prices higher at least in the short term.
So far in the year, Brent has traded at a year-to-date running average of US$68.40/bbl, 14.34% lower than the average of US$79.85/bbl in 2024. Bonny Light closed at US$63.74/bbl, down 3.09% on the week.