The Nigerian Naira recorded a modest weekly gain in the official foreign exchange market despite a slight depreciation on Friday, as the country’s external reserves continued to rise. According to data from the Central Bank of Nigeria (CBN), the local currency closed the week at N1,366.19 per US dollar on the official market, weakening by 13 kobo from the previous day’s rate of N1,366.06.
This marginal daily decline contrasted with a stronger weekly performance, where the Naira appreciated by N20.36 against the dollar in the official market over the trading week. Meanwhile, in the parallel (black) market, the currency ended the week with a more significant improvement, gaining N10 to close at N1,450 per dollar. The divergence between the official and parallel market rates persists, reflecting ongoing structural dynamics in Nigeria’s multiple exchange rate system.
The upward trajectory of Nigeria’s foreign reserves is seen as a supportive factor for the Naira. The CBN reported that gross external reserves rose to $46.91 billion as of February 5. This marks a continued accumulation, providing a larger buffer for the central bank’s interventions in the forex market and potentially bolstering investor confidence. Higher reserves improve the country’s import cover and sovereign credit profile, which can indirectly support currency stability by easing balance of payments pressures.
The CBN has maintained a managed float regime in the official market, with periodic interventions aimed at reducing volatility. The gradual rise in reserves follows a period of significant depletion and coincides with efforts to attract foreign portfolio investments and diaspora remittances through various policy incentives. Analysts note that while reserve buildup is positive, sustainable Naira stability also hinges on addressing underlying issues such as foreign exchange demand suppression, fiscal consolidation, and non-oil export diversification.
The performance across both markets suggests a cautiously optimistic outlook for the Naira in the short term, backed by improving reserve levels. However, the persistent gap between official and parallel rates indicates that market distortions and speculative activities remain challenges. Market participants will be watching for further CBN policy signals and the direction of global oil prices, which significantly impact Nigeria’s dollar earnings and reserve growth. The central bank’s continued commitment to market-determined exchange rate mechanisms, coupled with reserve management, will be critical in narrowing the rate differential and fostering long-term confidence in the currency.
