Naira Shows Mixed Trend as FX Market Liquidity Weakens
Nigeria’s foreign exchange market opened the week on a mixed note as the naira strengthened marginally in the parallel market but weakened at the official window, highlighting persistent liquidity pressures and uneven supply dynamics.
Latest figures show the naira appreciated to N1,387 per dollar in the parallel market, improving slightly from N1,389 per dollar recorded last Friday. The movement suggests modest demand easing in the informal segment, where rates are largely driven by retail transactions and speculative flows.
However, data published by the Central Bank of Nigeria indicated a contrasting trend in the Nigerian Foreign Exchange Market. The indicative exchange rate depreciated to N1,349.7 per dollar from N1,342.5 per dollar at the close of trading last weekend. This represents a N7.2 loss for the naira within the official window.
The divergence between both markets continues to reflect structural imbalances in foreign exchange supply, particularly within the formal segment where demand from importers, manufacturers, and financial institutions remains relatively strong.
Despite the depreciation in the official market, the gap between the parallel and official exchange rates narrowed significantly. The spread reduced to N37.3 per dollar from N47.5 per dollar recorded last Friday. Analysts typically interpret a narrowing spread as a signal of improved market alignment, although the underlying drivers may vary, including reduced speculative activity or temporary demand adjustments.
Further data from the apex bank showed that turnover in the Nigerian Foreign Exchange Market declined sharply. Total transactions in the interbank window stood at N18.77 million, representing an 84.9 per cent drop from N124.3 million recorded at the end of last week. The steep decline points to reduced trading activity and possible constraints in dollar liquidity within the system.
Market observers note that fluctuations in both segments often reflect broader macroeconomic conditions, including foreign reserve levels, capital inflows, and policy interventions by monetary authorities. The Central Bank has in recent months introduced a series of reforms aimed at improving transparency and boosting liquidity in the official market, though outcomes have remained mixed.
While the marginal appreciation in the parallel market may offer short-term relief for retail users, the depreciation in the official window and the sharp drop in turnover suggest that underlying pressures in the foreign exchange market persist.