The Naira weakened against the U.S. dollar across multiple foreign exchange (FX) markets on Tuesday, as demand for the greenback returned.
At the Nigerian Foreign Exchange Market (NFEM), the Naira depreciated by ₦11, reflecting a 0.7% decline, with the dollar quoted at ₦1,513/$1, compared to ₦1,502/$1 recorded on Monday, according to data from the Central Bank of Nigeria (CBN).
In the parallel market—commonly referred to as the black market—the Naira also depreciated. After opening at ₦1,570/$1, it dropped by ₦10 to close at ₦1,580/$1. A currency trader noted a slight increase in demand for dollars from end users, contributing to the devaluation.
The foreign exchange market in Nigeria operates under a liberalized framework, though the CBN frequently intervenes to stabilize the currency. Analysts at Coronation Research observed that the apex bank has successfully addressed the backlog of dollar claims that impacted the market in 2023 and early 2024. Additionally, the introduction of a new trading system has encouraged positive foreign investor sentiment.
As a result, Foreign Portfolio Investment (FPI) inflows exceeded $1 billion in October and November 2023, while the Federal Government of Nigeria (FGN) raised $2.2 billion in Eurobonds in early December.
According to a report by Comercio Partners, the CBN has played a key role in stopping the volatility of the Naira, particularly during periods of Eurobond-related inflows. Historically, after the 2017 Eurobond issuance, the central bank deployed targeted measures to boost foreign exchange liquidity.
These interventions included increasing dollar funding for Personal Travel Allowance (PTA), Business Travel Allowance (BTA), medical expenses, and tuition fees, reducing FX forward sales tenors from 180 days to 60 days for quicker dollar availability and expanding dollar allocations to Bureau de Change (BDC) operators to improve market supply.
Despite these efforts, analysts note that these interventions provide only temporary relief. While external reserves typically rise following Eurobond inflows, they tend to deplete within months, highlighting how fragile Nigeria’s economic fundamentals. Experts emphasize that sustained monetary interventions must be accompanied by structural economic reforms for long-term stability.
