Analysts Predict New Exchange Rate as Dollar Liquidity Falls Sharply in Nigeria

• In the past week, the dollar supply in the Nigerian forex market dipped significantly, leading to a brief fall of the naira
• The naira depreciated to N1,530 per dollar last week, but quickly rebounded into the new week as the CBN sold more FX
• However, analysts have predicted that the naira will remain stable given the current FX interventions by the CBN

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

A sharp fall in dollar liquidity last week reversed the naira’s short-lived recovery in Nigeria’s official FX market.

The naira depreciated by N1.70 against the US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) last week, closing at N1,530.26 per dollar, after gaining steadily in previous sessions.

Reduced FX liquidity fuels pressure

This depreciation comes at a time when the dollar supply in the official window plunged 57.4%, highlighting a resurgence of pressure in the currency market.

According to Coronation Research, dollar inflows dropped to $749.8 million, compared to $1.76 billion recorded the prior week.

The dip in foreign exchange inflows was driven largely by reduced contributions from exporters and non-bank corporates.

Importers and local corporate demand for foreign exchange outpaced available supply, contributing to the reversal in the naira’s short-lived rally.

Foreign investors still dominate inflows

Interestingly, while the official rate weakened, the parallel market saw a marginal gain, with the naira closing at N1,545 per dollar, up 0.97%.

This was attributed to reduced transaction pressure, following the resumption of naira debit card usage for international payments by some Nigerian banks.

Market Forces Africa reports that despite the dollar crunch, foreign portfolio investors (FPIs) continued to play a dominant role in the FX market.

They contributed 46.13% of total inflows, maintaining their lead for the eighth straight week, suggesting sustained interest in Nigerian fixed-income instruments.

Non-bank corporates contributed 33.68%, while exporters made up 18.45%.

Individual and corporate international inflows remained negligible at less than 1% combined.

CBN reserves show modest recovery

Meanwhile, data from the Central Bank of Nigeria (CBN) showed an increase in external reserves.

Reserves rose by $173.88 million, or +0.47%, to $37.36 billion, reversing the previous week’s decline of $138.3 million.

This buffer is expected to help the CBN continue its defence of the naira through targeted FX interventions.

Analysts say sustained reserves growth will be crucial in maintaining long-term exchange rate stability.

Outlook: Naira Faces a Delicate Balance

Analysts at Coronation Research remain cautiously optimistic.

They forecast contained exchange rate pressure, supported by ongoing CBN interventions, strong FPI interest, and continued participation in the official FX window.

The resumption of international payments with naira debit cards is unlikely to trigger immediate volatility, they added.

However, all eyes remain on liquidity flows, as the naira's path continues to be shaped by the dollar’s availability and CBN’s policy stance.

CBN sells dollars to Access, UBA, other dealers

Legit.ng earlier reported that Nigeria’s local currency, the naira, recorded a major gain against the US dollar, closing at N1,518.88 at the official market as of Monday, July 15, 2025.

This followed a targeted foreign exchange (FX) intervention by the Central Bank of Nigeria (CBN), aimed at improving market liquidity and easing pressure on the naira.

According to spot FX data from the CBN, the naira’s strength came on the heels of $50 million in sales to authorised dealers during the previous week.

Source: Legit.ng