Naira defies 30% FX inflow slump as weak import demand eases pressure

The naira remained relatively stable in April despite a sharp decline in foreign exchange (FX) inflows into the market, as weaker import demand helped ease pressure on the local currency amid rising geopolitical tensions in the Middle East.

According to a Quest Merchant Bank report, FX inflows into the market fell by 30 percent month-on-month to $2.9 billion in April, largely due to subdued foreign investor participation triggered by escalating tensions between the United States and Iran.

Despite the softer FX supply conditions, the naira appreciated marginally by about 1 percent month-on-month to close at N1,374/$ in April.

The report noted that the local currency also showed improved stability during the month, with the average exchange rate strengthening to N1,361.51/$ from N1,381.18/$ in March, reflecting reduced volatility in the FX market.

Analysts at the bank said the naira’s resilience during the period was mainly driven by easing demand-side pressures rather than stronger FX inflows.

Insights from FX market checks showed that import-related trading activity weakened significantly during the month as heightened geopolitical tensions disrupted global supply chains and altered trade flows.

“The subdued import activity can be attributed to escalating tensions in the Middle East, which have disrupted global supply chains and altered trade flows,” the report stated.

The bank explained that the slowdown in import demand reduced the need for dollar sourcing by importers, helping to offset weaker FX inflows and limit exchange rate volatility.

The naira’s appreciation extended beyond the official market into the parallel market, where the local currency strengthened by about 2 percent month-on-month to N1,398.15/$.

According to the report, the stronger performance of the naira across both market segments helped narrow the gap between official and parallel market exchange rates, indicating reduced speculative activity and improved domestic sentiment.

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Analysts, however, warned that ongoing geopolitical tensions could continue to weigh on import activity in the near term as uncertainty, shipping delays and rising transaction costs force importers to remain cautious.

Importers are expected to delay procurement and moderate trade volumes until there are clearer signs of normalised global trade flows.

The report added that softer demand pressures are likely to continue supporting relative stability in the FX market despite persistent volatility in FX supply conditions.

However, the naira weakened against the dollar in the official foreign exchange (FX) market on Monday. At the same time, deal volume declined across market segments despite a sharp increase in turnover at the Nigerian Foreign Exchange Market (NFEM).

Data published by the Central Bank of Nigeria (CBN) showed that the naira depreciated by N11.77 as the dollar was quoted at N1,373.16 on Monday, representing a 0.86 percent loss compared to N1,361.39 recorded on Friday at the NFEM.

The number of deals executed at the NFEM declined by 15.29 percent to 277 on May 8, 2026, from 327 recorded in the previous session. However, turnover surged by 244.4 percent to $502.29 million on the same day, from $145.84 million recorded on May 7, 2026.

At the interbank segment of the market, trading activity also weakened. The number of deals dropped by 26.37 percent from 91 on Friday to 67 deals on Monday, while turnover declined by 26.98 percent to $51.17 million from $78.15 million.

In the parallel market, also known as the black market, the naira depreciated by N5 to close at N1,400 per dollar on Monday compared to N1,395 quoted on Friday. The spread between the official and parallel market rates narrowed to N27 per dollar from N34 recorded at the end of last week.

Nigeria’s external reserves, which provide the CBN with the buffer to support the local currency, remained broadly stable. Data on the apex bank’s website showed that reserves rose marginally by 0.06 percent to $48.36 billion as of May 8, 2026, from $48.33 billion recorded on May 5.

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.