The local currency sheds 0.85% in one week as sustained demand pressures outweigh gains from Nigeria’s growing foreign reserves…..
The naira ended the week on a weaker note against the United States dollar at the official foreign exchange market, extending a string of losses despite a continued increase in Nigeria’s external reserves.
Figures released by the Central Bank of Nigeria (CBN) showed the local currency closed at N1,381.70 per dollar on Friday, July 10, compared with N1,370.00/$1 recorded a week earlier, representing a depreciation of N11.70, or 0.85 per cent.
The naira came under pressure for most of the trading week, recording losses on four out of five trading sessions before ending at its weakest official level during the period under review.
Naira’s Performance During the Week
Trading opened on Monday, July 6, with the naira slipping marginally to N1,371.00/$1, down by N1 from the previous Friday’s closing rate.
The currency weakened further on Tuesday, settling at N1,379.00/$1, an N8 decline from Monday’s close.
On Wednesday, the official exchange rate remained unchanged at N1,379.00/$1, although the currency traded within an intraday range of N1,376/$1 to N1,387/$1.
The downward trend resumed on Thursday as the naira eased slightly to N1,379.25/$1, before closing the week at N1,381.70/$1 on Friday after shedding another N2.45 against the dollar.
FX Market Activity
CBN data also reflected fluctuations in market activity during the week.
Turnover on the Nigerian Foreign Exchange Market (NFEM) stood at $220.18 million on Monday before climbing to $423.02 million on Tuesday and reaching a weekly high of $504.67 million on Wednesday.
Trading activity slowed to $298.92 million on Thursday, while no NFEM turnover figure was published for Friday.
Interbank market transactions also fluctuated throughout the week, rising from $54.18 million on Monday to $208.09 million on Wednesday before declining to $78.71 million on Thursday and $71.04 million on Friday.
External Reserves Continue to Rise
The naira’s decline comes even as Nigeria’s foreign exchange reserves continue their upward trajectory.
According to CBN data, the country’s external reserves climbed to $51.74 billion as of Thursday, July 9, representing an increase of approximately $217.7 million from the $51.52 billion recorded a week earlier.
The latest figure builds on the strong recovery recorded in June, when Nigeria’s reserves exceeded the $51 billion mark for the first time in about 17 years, supported by improved foreign exchange inflows and the impact of ongoing market reforms.
Although reserves briefly dipped below that level towards the end of June, they have resumed an upward trend since the beginning of July.
Analysts Warn Gains May Be Temporary
Despite the improvement in the country’s reserve position, global brokerage firm EBC Financial Group has cautioned that the recent gains may not be sustainable.
In its latest market outlook released on Thursday, the firm said Nigeria’s external reserves remain exposed to volatile portfolio inflows and the country’s continued dependence on short-term capital movements.
According to the report, while recent foreign exchange reforms introduced by the CBN have boosted investor confidence and strengthened reserve levels, maintaining that momentum will depend on attracting more long-term investments, sustaining oil export earnings and preserving confidence in the naira.
