Victor Ezeja
The Nigerian naira ended last week on a relatively stable note at the official segment of the foreign exchange market. It concluded the month of May with a N16.03 against the United States dollar at the official window as trading closed at N1,586.15 per dollar on Friday, 30 May, compared to N1,602.18 per dollar recorded at the beginning of the month.
The Nigeria Foreign Exchange Market (NFEM) data published by the Central Bank of Nigeria (CBN) showed that the naira traded between N1,579.40 (Monday, 26 May) and N1,586.15 (on Friday, 30 May), which was the last day of currency trading at the official market for last month.
Join our WhatsApp ChannelHowever, the local currency recorded depreciation at the parallel or black market last month. The naira fell to N1,620 on the black market on Friday, May 30, after trading for N1,605 per dollar at the beginning of the month.
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With the naira’s relative stability outlook in recent weeks, analysts believe that even though a substantial appreciation is unlikely, it might continue on that trajectory in the short term, on the back of CBN’s interventions in the foreign exchange market.
The apex bank has continued to make targeted interventions in the foreign exchange market to boost liquidity. The CBN has been actively supplying dollars to the official market (NAFEM) to ease demand pressure. Regular FX sales to Bureau De Change (BDC) operators help stabilise the rate at the parallel market. Nigeria’s external reserves have seen marginal improvements. Also, the bank’s efforts to boost non-oil exports (e.g., diaspora remittances, foreign investments) are said to contribute to the improvement in the foreign reserves.
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According to analysts at Afrinvest Securities Limited, if the CBN continues its intervention to increase liquidity, the naira may stay on its current trajectory this month.
However, analysts at Commercio Partners stated last week that such CBN market support cannot continue indefinitely without “jeopardising Nigeria’s external buffers.” It noted that the reserves-to-imports coverage is increasingly vulnerable, especially in the face of any oil production or price shocks.
The group further raised concerns that if the CBN does not extend the recapitalisation deadline for BDCs beyond June 3, it might cause FX supply disruption, “particularly for SMEs and individuals relying on retail access, likely leading to increased volatility and potential widening of the parallel market premium.”
Victor Ezeja is a passionate journalist with seven years of experience writing on economy, politics and energy. He holds a Master's degree in Mass Communication.
