Over the past week, the naira experienced a reversal in its recent gains as it weakened against the US dollar in both the parallel and official markets. By the end of the week, the naira had depreciated by 1.66%, closing at 1,517.24/$ compared to the previous week’s 1,492.49/$. A similar trend was seen in the parallel market, where the naira averaged 1,520/dollar, showing an increase in demand for the greenback.
Bureau De Change operators reported a significant loss for the naira, with a closing rate of 1,570/dollar at the end of the week. In February 2025, the naira had recorded an 8.5% gain month-on-month in the parallel market, settling at 1,490/$, while on the official market, it closed at 1,500/$, indicating a 1.7% decline.
AIICO Capital Limited attributed the naira’s depreciation to heightened demand from foreign portfolio investors and local corporates. Despite interventions from the Central Bank of Nigeria, the offshore demand for the dollar remained strong, leading to increased rates.
CardinalStone echoed similar sentiments, noting increased pressure on the naira due to profit-taking actions by foreign portfolio investors and local corporates, counteracting the CBN’s interventions at the interbank market.
Cowry Assets Management Limited emphasized the importance of CBN’s weekly interventions in the FX market to support the naira and influence currency movements. With the CBN’s substantial reserves, currently at $38.35bn, there is confidence in its ability to provide a cushion for the naira.
Looking ahead, experts anticipate a moderate market performance with a potential improvement in dollar supply that could relieve pressure on the local currency. Afrinvest also forecasts a positive outlook for the naira in March, supported by the CBN’s continuous supply of USD to BDCs and DMBs, barring any unforeseen market shocks.
Prior to these developments, concerns had been raised about challenges such as increasing debt, declining foreign reserves, and high inflation rates, which pose threats to the naira’s stability and the gains from ongoing FX reforms.