CBN confirms new exchange rate as naira depreciates despite high reserves

The Nigerian naira weakened against the US dollar across official and parallel markets as tighter liquidity and stronger dollar demand pressured the currency, even as foreign exchange reserves climbed. Data from the Central Bank of Nigeria (CBN) confirmed a new closing rate at the Nigerian Foreign Exchange Market, while global oil prices, geopolitical developments, and interest-rate dynamics continued to shape sentiment.

Official and parallel market moves

The naira closed at N1,328.50 per dollar at the Nigerian Foreign Exchange Market, a marginal 0.05% depreciation from the previous session. Weakness was more pronounced in the parallel market, where the naira slipped by about 0.51% to N1,387 per dollar as demand for foreign currency increased.

The divergence widened the spread between official and parallel market rates to roughly N59 per dollar, up from around N52 in the prior session. A broader gap often signals mismatches in dollar supply and demand between the formal and informal segments of the market.

Mixed performance against other major currencies

Despite its setback against the dollar, the naira posted gains versus the pound and euro at the official window. It settled at N1,762.92 to the British pound and N1,514.89 to the euro. These mixed moves highlight shifting cross-currency dynamics and relative strength differentials across major currencies.

Reserves rise, offering a stronger buffer

Nigeria’s gross external reserves increased to $54.808 billion, adding to the country’s financial cushion amid global market volatility. Higher reserves can improve market confidence and help manage near-term FX liquidity pressures, though sustained stability typically depends on consistent foreign exchange inflows, effective market operations, and robust export performance.

Oil climbs above $102, but upside remains capped

Brent crude rose 2.16% to $102.54 per barrel, supported by uncertainty around the reopening of the Strait of Hormuz. The rally pushed Brent’s year-to-date gain to 68.51%. However, plans by Saudi Arabia to resume exports via the East-West pipeline and signs of progress in US–Iran talks tempered further price gains.

For Nigeria, elevated oil prices can bolster foreign exchange earnings given crude’s outsized role in export receipts. The net impact, however, depends on actual production, export volumes, and the efficiency of repatriating proceeds through the official FX window.

Global rates and market sentiment

Higher US interest rates and elevated Treasury yields continued to weigh on emerging-market assets, contributing to a stronger dollar environment. As geopolitical risks ebbed slightly on expectations around US–Iran discussions, demand for safe-haven assets eased; gold fell 0.84% to $4,327.15 per ounce and is down 0.69% year to date.

Against this backdrop, Nigeria’s currency performance is likely to be influenced by the interplay of global risk appetite, domestic FX supply conditions, and crude price trajectories in the coming weeks.

Policy backdrop: CBN rate cut and currency outlook

The CBN’s recent 350-basis-point cut to its Monetary Policy Rate, bringing it to 23%, shifted the policy stance toward supporting growth and liquidity. Analysts note that lower interest rates can reduce returns on naira-denominated assets, potentially adding pressure on the currency if foreign inflows do not keep pace with outflows. At the same time, the rate cut may ease domestic financing costs and support credit conditions, which could aid broader economic activity.

Balancing these effects will require steady FX market management, credible communication, and continued reforms to deepen market confidence. Effective measures that improve dollar supply, curb speculative demand, and enhance transparency in the FX market could help narrow the gap between official and parallel rates over time.

What to watch

• FX liquidity and intervention dynamics at the official window.
• Trends in oil production, exports, and repatriation of earnings.
• Movements in global interest rates and the US dollar index.
• Progress on structural reforms that improve investment inflows.
• Trajectories of external reserves and their utilization.

In the near term, the confirmed official exchange rate of N1,328.50 per dollar underscores the naira’s sensitivity to both domestic liquidity conditions and global market currents. Elevated reserves and higher oil prices provide a buffer, but sustained currency stability will hinge on consistent FX inflows, disciplined policy execution, and improved market confidence.