The Nigerian naira ended last week with a mixed performance in the foreign exchange market, as it recorded marginal gains at the official window but slipped in the parallel market.
Figures from the National Foreign Exchange Market (NFEM) show that the naira appreciated slightly by 0.01 per cent, closing the week at ₦1,533.57 per dollar compared to ₦1,533.74 per dollar in the previous week.
However, trading was less favourable in the parallel market, where the local currency weakened by 0.52 per cent to close at an average of ₦1,545 per dollar. Market watchers attributed the decline to rising demand for foreign exchange, driven by businesses and individuals seeking to buy dollars amid low liquidity.
According to the Cowry Asset Management weekly report, the pressure on the naira at the parallel market was largely due to illiquidity in the system, which limited supply to meet growing demand.
The National President of the Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, explained that the primary challenge in the foreign exchange market at the moment is a shortage of liquidity, worsened by seasonal travel activities.
“I think the bottom line is liquidity. Yes, we are witnessing a spike in the market. That volatility has been there. Many other factors could be responsible. One, I think it’s liquidity; two, it’s the travellers’ demands and other drivers that are putting pressure on the naira,” Gwadabe said.
He also observed that the gap between the official and parallel market rates, which had narrowed in recent weeks, now appears to be widening again — a situation that could invite fresh speculation if not addressed.
In the build-up to the holiday season, Nigerian banks announced the resumption of naira debit cards for international transactions. This reverses an earlier decision in December 2022, when banks stopped the use of naira-denominated debit cards for foreign transactions due to foreign exchange scarcity.
Cowry Asset Management expressed optimism that the naira would sustain its modest gains at the official market in the coming week, helped by the Central Bank of Nigeria’s continued intervention in the FX market.
“While global trade tensions and volatility in the oil market, particularly the recent downward trend in crude prices, pose potential headwinds, the apex bank’s efforts to inject liquidity and stabilise demand pressures should provide a buffer against sharp depreciation. Although external factors may exert intermittent pressure, we anticipate the naira to hold relatively steady at the official window, barring any major shocks in global commodity or financial markets,” the report said.
Similarly, AIICO Capital Limited noted that the CBN’s recent announcement of clearing all outstanding FX forward contracts had strengthened confidence in the market and improved naira performance at the NFEM.
On Thursday, the CBN disclosed that it had completed a forensic audit of foreign exchange forward contracts, revealing significant irregularities in their execution. The audit uncovered multiple infractions, including cases where company names on approved sales differed from those on the Form M portal, and instances where approved FX forward sales exceeded the total value of the forex form number.
Other violations included sales higher than actual demand, importation of non-permissible items, unauthorised companies importing restricted goods such as milk, vague descriptions of imports, and approved sales without genuine demand.
The audit also found incorrect or missing forex form numbers, blank Form M submissions, rejected Form A applications that still received approvals, and cases where approved sales values were higher than the cost of imported goods listed on either Form A or Form M portals.
The CBN stated that all valid FX contract claims had now been settled and that it was considering legal action against companies that violated the rules. The bank stressed that with the completion of the forensic audit, all pending cases of undelivered forward contracts are officially closed.
Market analysts believe that the combination of CBN’s clean-up actions, liquidity injections, and ongoing policy adjustments will help stabilise the FX market in the near term, although external risks such as global oil price fluctuations and geopolitical tensions could still influence exchange rate movements in the months ahead.
