Naira’s Rally Continues Amid Dollar Weakness and Strong Inflows
The Nigerian naira continued its upward trend, closing last week at 1,465/$ in the official foreign exchange market. This improvement was driven by a weaker U.S. dollar, which was influenced by disappointing economic data in the United States and a temporary government shutdown. Additionally, increased foreign exchange inflows helped reduce pressure on demand for dollars.
At the parallel market, the naira also saw an improvement, strengthening by 3.8% over the week to close at N1,460.00/$1.00. This brought the difference between the official and parallel rates down to a negative 5.68/$ from a previous positive 34.34/$.
Analysts suggest that this development indicates a reduction in speculative pressure and greater confidence in the official market. AIICO Capital, in its weekly report, highlighted that the strong liquidity inflows came primarily from offshore investors and international money transfer operators. The report noted that the FX trading started with a strong supply of dollars, pushing rates to 1,475.35/$. Midweek, consistent interventions and improved flows kept the market within the 1,445–1,468/$ range, helping to contain volatility.
By the end of the week, the naira strengthened slightly due to sustained dollar supply and reduced demand, closing at 1,465.68/$, an increase of 101 basis points compared to the previous week.
Despite a decline in global oil prices, the naira maintained its strength, reinforcing the idea that the currency is decoupling from global oil price fluctuations. Although oil prices ended higher on Friday, they recorded a weekly loss of 8.1% following news of potential increases in OPEC+ supply. Brent crude and WTI are on track for their steepest monthly decline in four months. Brent crude traded at $64.53/bbl, down 8.3% for the week, while WTI stood at $60.86/bbl, down 7.6% for the week. Nigeria’s Bonny Light crude fell 4.66% to $69.94/bbl, raising concerns about potential revenue pressures for the government and broader fiscal implications if oil prices remain low in the short to medium term.
Experts remain cautious, as the possibility of an additional 500,000 bpd output increase could deepen the supply glut. These fears were realized on Sunday when Saudi Arabia, Russia, and six other OPEC+ members decided to raise their production quotas by 137,000 barrels per day in November, continuing their push for greater market share.
Looking ahead, multiple analysts believe the naira will maintain its positive performance across all FX segments, supported by continued intervention from the Central Bank of Nigeria (CBN).
Cowry Assets Management Limited stated, “We expect the naira to maintain relative stability across market windows, supported by sustained FX inflows, CBN interventions, and a softer dollar environment. However, downside risks remain from external factors, particularly the ongoing weakness in crude oil prices, which could weigh on external reserves and government revenues if prolonged.”
AIICO Capital added, “The naira is likely to maintain its current trading range.”
Meanwhile, external reserves continued their twelve-week rally, rising by $150.99m to reach $42.41bn as of October 2.
