Naira ends week flat as external reserves rebound

The naira ended the five trading sessions of the week relatively unchanged across various segments of the foreign exchange (FX) market, even as Nigeria’s external reserves posted a modest rebound.

At the Nigerian Foreign Exchange Market (NFEM), the naira closed on Friday at N1,530.26 per dollar, representing a marginal depreciation of 0.1 per cent from the N1,528.33 recorded the previous Friday, according to data published by the Central Bank of Nigeria (CBN).

Meanwhile, Nigeria’s external reserves increased to $37.35 billion as of July 10, 2025, reflecting a 0.45 per cent rise from $37.18 billion on July 2. The uptick marks a temporary relief in what had been a downward trend in reserve levels.

Before this rebound, reserves had dropped by 8.8 per cent year-to-date, translating to a $3.6 billion decline from $40.88 billion at the start of the year to $37.28 billion as of July 8, CBN data showed.

On a daily trading basis, the naira recorded a slight depreciation of 0.27 per cent on Friday, with the dollar quoted at N1,530.26 compared to N1,525.98 on Thursday at the official market.

However, in the parallel market, also known as the black market, the naira appreciated by N5 or 0.3 per cent, trading at N1,545 per dollar on Friday from N1,550 the previous day. This gain reflects a continued easing in street-level demand for foreign currency.

Despite the ongoing summer season, typically a period of high travel and elevated FX demand, the naira has shown surprising stability. This is occurring against the backdrop of declining oil prices and a fragile external reserve position.

Analysts attribute the trend to weaker-than-expected demand for the dollar and a growing preference for local alternatives. Dollar demand has remained relatively muted, even during the peak summer travel season, suggesting a decline in international travel and a more restrained approach to foreign currency spending.

Funmi Adebowale, head of research at Parthian Partners, said, “The muted dollar demand during what is typically a high-travel summer period reflects a combination of both demand and supply-side dynamics. On the demand side, household incomes remain under pressure, leading to more cautious spending and a scaling back of discretionary expenses, including international travel. Even during this year’s Hajj, activity appeared relatively subdued, with fewer advertisements and travel campaigns compared to previous years. On the supply side, the FX market has seen improved liquidity, supported by increased foreign portfolio inflows driven by stronger investor confidence and a favorable perception of Nigeria’s economic reform agenda. These combined factors are helping to ease pressure on the naira and stabilize dollar demand, even during peak travel months.”

She added that despite the fall in oil prices and the earlier decline in external reserves, the naira has continued to appreciate, an unusual pattern given Nigeria’s dependence on oil for most of its FX earnings. “This development is driven by several key factors,” she explained. “First, there has been a significant reduction in FX demand for the importation of Premium Motor Spirit (PMS), owing to increased domestic refining capacity, particularly from the Dangote Refinery. This shift has eased pressure in the FX market.

Second, the country has seen a surge in foreign portfolio inflows, buoyed by growing investor confidence following the implementation of market-friendly reforms by the current administration, including exchange rate liberalisation and fiscal policy adjustments. These capital inflows have helped stabilise and strengthen the naira, despite external headwinds.”

According to Adebowale, a sustained appreciation of the naira could have wide-ranging implications for the economy. “For the broader economy, sustained naira appreciation could help reduce imported inflation, support monetary stability, and improve the country’s overall investment climate. However, the trend remains vulnerable to external shocks, particularly if oil prices continue to fall or global financial conditions tighten,” she concluded.