The Naira weakened again against the United States dollar on Friday, ending the week on a downward trend despite the steady rise in Nigeria’s external reserves. According to new data from the Central Bank of Nigeria (CBN), the currency closed at N1,442.43 per dollar, weaker than the N1,441.44 it traded the previous day.
This shows that the Naira depreciated by 99 kobo on a day-to-day basis at the official foreign exchange market. Although the drop may appear small, it marks the fourth time the Naira declined within the week, raising fresh concerns about stability in the foreign exchange market.
At the black market, however, the Naira remained unchanged, selling at N1,465 per dollar on Friday, the same rate recorded on Thursday. Traders said there was no major shift in demand or supply that could have moved the rate.
A review of the week’s trading showed that the Naira lost a total of N5.86 at the official market, based on figures released by the CBN. Market analysts say the repeated depreciation suggests renewed pressure on the currency, possibly caused by increased demand for dollars from importers and businesses settling foreign obligations.
While the government has taken several steps in recent months to stabilise the exchange rate, including reforms in the foreign exchange market and tighter monetary policies, the current trend indicates that the market remains sensitive to fluctuations in demand and supply.
Interestingly, the fall in the Naira came at a time when Nigeria’s external reserves continued to grow. The reserves rose to $43.54 billion as of Thursday, up from $43.35 billion recorded the previous Friday.
Growing reserves are usually a positive sign for a country’s currency because they show that the government has more foreign exchange to support imports and defend the Naira when needed. Analysts note that the recent rise may be linked to higher crude oil prices, improved oil production, and inflows from foreign investors responding to recent economic reforms.
However, despite the increase in reserves, the Naira has struggled to maintain a consistent upward movement. Some experts believe that the rising import bill and persistent demand for dollars by businesses may be weakening the impact of higher reserves.
The Naira has experienced months of volatility since the CBN introduced reforms aimed at unifying the exchange rate and reducing pressure on the forex market. The reforms, which include allowing greater flexibility in the official market, were meant to attract foreign investment and narrow the gap between the official and parallel market rates.
Although the measures led to brief periods of appreciation earlier in the year, the currency has continued to move up and down due to market forces such as oil revenue fluctuations, investor confidence, and seasonal demand for foreign exchange.
Nigeria, which depends heavily on crude oil for foreign earnings, remains vulnerable to global oil price changes. Any drop in oil production or decline in prices often affects the country’s ability to earn dollars, creating pressure on the Naira.
As the new trading week approaches, economic observers say the Naira may continue to face pressure unless there is a major improvement in foreign exchange supply. Some analysts expect the CBN to intensify its intervention efforts or introduce new policies to reduce volatility.
