Nigeria’s currency depreciates despite CBN interventions, as stalled naira-for-crude talks add to economic uncertainty
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The Nigerian naira continued its downward slide at the official foreign exchange market last week, weakening by 1.25% to close at ₦1,536.89 per dollar on Friday, highlighting the persistent volatility in the currency market.
Data from the Central Bank of Nigeria (CBN) showed that the naira opened the week at ₦1,528.03/$, a decline from the previous session’s ₦1,517.93/$. The depreciation continued midweek, touching ₦1,532.93/$, before a brief recovery on Wednesday and Thursday. By Friday, however, the currency had weakened further to ₦1,536.89/$.
The slide coincided with stalled negotiations on the naira-for-crude agreement between the Nigerian National Petroleum Company Limited (NNPCL) and domestic refiners. The uncertainty surrounding the deal has added fresh strain on Nigeria’s foreign exchange market, with major players forced to source US dollars to secure petroleum products after the Dangote Refinery suspended naira-based transactions.
Analysts warn that these developments could exacerbate pressure on the forex market, pushing demand for dollars even higher. Despite recent interventions by the CBN—aimed at boosting foreign exchange supply to banks and Bureau de Change operators—structural weaknesses in the FX market remain unresolved.
“Looking ahead, we anticipate a mixed outlook for the naira, as demand pressures for the dollar persist, driven by speculative activity and arbitrage opportunities,” noted analysts at Cowry Assets Management Limited. “However, CBN interventions will likely continue to play a stabilising role.”
Parallel Market and Foreign Reserves
While the official exchange rate weakened, the parallel market saw a marginal gain, with the naira appreciating by 0.77% to close at ₦1,568/$, a ₦12 improvement from the previous week.
Foreign reserves, however, dipped slightly, falling 0.06% from $38.37 billion to $38.35 billion. This decline reflects the CBN’s ongoing efforts to defend the naira, even as foreign exchange inflows remain weak.
Oil Prices and Global Factors
Nigeria’s foreign exchange reserves are largely reliant on oil revenues, leaving the naira vulnerable to external shocks. Last week, Brent crude oil prices rose by 3%, closing at approximately $85 per barrel, driven by new US sanctions on Iran and OPEC+’s decision to maintain production cuts until 2026.
While higher oil prices may boost Nigeria’s revenue, analysts caution that geopolitical uncertainties and supply disruptions could still pose risks to the nation’s FX stability.
With talks on the naira-for-crude deal expected to resume this week, all eyes will be on CBN policy moves and government intervention to determine whether the naira can regain stability or continue its downward spiral.
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