Naira seen falling further amid external reserves growth

The Nigerian foreign exchange (FX) market will likely witness further depreciation in the value of the naira despite a rise in the external reserves.

Nigeria’s external reserves rose by 0.69 percent to $32.642 billion as of May 16, 2024 from $32.418 billion in May 9, 2024 data from the CBN indicated.

The naira fell by 2.07 percent, week-on-week to close to N1,497.33 per dollar on Friday compared to N1,466.31 closed on the previous week, at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

“We anticipate extended pressure on the Naira as FX supply-demand mismatch persists,” analysts at Afrinvest Securities Limited said in a report.

In five trading days, the naira weakened by 1.28 percent as the dollar was quoted at N1,497.33 on Friday as against N1,478.11 quoted on Monday, according to the data compiled from the FMDQ Securities Exchange Limited.

On daily trading basis, the local currency appreciated by 2.45 percent from N1,533.99 per dollar exchanged on Thursday at NAFEM.

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The naira depreciated at the parallel market, popularly called black market, falling to an average rate of N1,521.66 per dollar, last week.

Dollar supplied by willing sellers and willing buyers declined by 63 percent, week-on-week to a total of $991.90 million last week from $608.50 million recorded the previous week.

The dollar supplied day-on-day dropped by 69.39 percent to $83.50 million on Friday from $272.86 million recorded on Thursday.

The report noted that the price of Brent benchmark crude rose by 1.4 percent w/w, to close at $83.98/bbl, after U.S. consumer inflation readings came in softer than expected – boosting hopes for firmer demand as the travel-dense summer period approaches.

For analysts at Comercio Partners, the naira’s trajectory will likely be influenced by a range of factors. The CBN’s potential policy rate adjustments could attract foreign investors back to Nigeria’s fixed-income market, supporting the currency.

They said sustained appreciation will require broader economic diversification efforts and continued reforms to address FX market speculation and improve regulatory frameworks.

“Detailed analysis of sector-specific impacts, such as the manufacturing and export sectors, will provide deeper insights into how currency fluctuations affect key industries. Monitoring trends in foreign investment, remittances, and FX reserves utilization will also be crucial in understanding Nigeria’s economic resilience and its ability to navigate global economic challenges,” the analysts said.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.