The Nigerian naira has dropped further to N1,629 per US dollar in the official Nigerian Forex Market (NFEM) after the Central Bank of Nigeria (CBN) pumped $668.8 million into the system to try and support the currency.
As per the figures, there was a decline of N29 vis-à-vis the previous week’s value of N1,600/$, while the parallel market saw a dip to N1,570/$ from N1,565/$, thus widening the gap between official and unofficial rates by N59 per dollar.
The Naira dropped by 2.4% in March alongside a depreciation of 2.6% in the unofficial market due to heavy demand from foreign portfolio investors and domestic companies. Afrinvest and AIICO Capital reported that there was significant pressure on the currency even as the CBN increased the sale of dollars in the market. AIICO reported a decline of 2.97% for the month of March, ending it at N1,536.82/$ in the official market, wherein the parallel rates followed suit.
The demand pressure was too great to be supported by even the mid-month liquidity injections from the CBN. Heading into Q2, the naira had depreciated by 7% in the quarter, with foreign reserves dropping by $110 million to $38.31 billion.
Weeks saw the most volatility, with the N1,525–N1,535/$ region witnessing support from the CCBN along with limited inflow from outside, which quickly changed into a surge in demand mid-week.
The postponement of the Nigerian Electricity Regulatory Commission’s (NERC) decision on raising power tariffs considerably impacted the naira’s depreciation, which reached an alarming N1,570/$.
Outside factors like increased oil supply from OPEC+ and trade agoraphobia catalyzed by US tariff threats fueled risks for the naira, for which the currency ultimately closed the week 1.97 percent weaker at N1,567.02/$. Dropping reserve levels further compounded the issue, plunging by \$149 million to \$38.15 billion.
CBN policy is ever-revolving, so additional depreciation will likely result in more liquidity injections. However, as policy stays out of external trade negotiations, dropping capital investments could signal a flight risk in the short term.
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