Naira Strengthens by N8 last week to N1,539.23/$ as Nigeria’s FX Reserves Climb

The naira continued its bullish trend against the US dollar last week, closing at N1,539.23/$ in the official Nigerian Foreign Exchange Market, up from N1,547.43/$ the previous week.

In the parallel market, the naira also appreciated, trading at N1,565/$, narrowing the premium over the official rate to just N26 from N33 the week before. The narrowing gap reflects better market alignment and improved FX liquidity conditions.

Data from the Central Bank of Nigeria (CBN) reveals that Bonny Light crude oil sold at $81 per barrel last week, outperforming global benchmarks like Brent and WTI. While Brent crude slipped to $68 per barrel and WTI hovered slightly above $65, Bonny Light’s resilience provided a critical support buffer for Nigeria’s external reserves and currency position.

Foreign reserves rose to $37.37 billion, marking a 0.78% weekly increase from $37.08 billion, driven by new FX inflows and improved capital account performance. The improved reserve position is helping the CBN defend the naira more effectively in both the official and parallel markets.

Global dynamics also favoured the naira, as the US dollar index slumped to 97.2, its lowest since February 2022, following a four-day slide sparked by expectations of imminent Federal Reserve rate cuts. The weaker greenback added momentum to emerging market currencies, with the naira among the top beneficiaries.

Investor sentiment toward Nigeria is also rebounding, as seen in the Nigerian Exchange Limited’s (NGX) Domestic and Foreign Portfolio Investment Report for May. The NGX recorded a 45.3% surge in total transactions to N700.50 billion from N483.04 billion in April, showing renewed investor interest in Nigerian equities.

Foreign portfolio inflows jumped sharply by 88.5% month-on-month, rising to N118.91 billion from N63.07 billion, reversing the previous month’s downtrend. Analysts attribute the rebound to moderating fixed-income yields and strengthening investor confidence in Nigeria’s macroeconomic reforms.

Despite a dip in domestic inflows by 38.38% to N581.59 billion, foreign appetite filled the gap, with institutional and retail activity remaining steady. Net inflows, however, declined by 54% to N2.64 billion in May, compared to N5.74 billion in April, largely due to the strong FX inflows (N13.31 billion) being partially offset by net domestic outflows of N10.67 billion.