The naira depreciated by 0.12% to N1,543.03 per US dollar in the official market, according to Bloomberg BMatch data. This decline follows reduced foreign exchange interventions by the Central Bank of Nigeria (CBN), which sold approximately $50 million to authorised dealer banks last week to manage exchange rate pressures and boost FX liquidity.
The CBN's strategy of aggressive dollar sales has eased, possibly signaling a shift towards targeting a lower exchange rate for the year-end appraisal. In December, consistent dollar injections by the CBN, supported by rising external reserves fueled by Eurobond inflows, helped the naira gain over 8%.
However, Nigeria's foreign reserves dropped by $31.56 million last week, ending a five-week growth streak and settling at $40.85 billion. Forward market rates also weakened, with 1-month contracts depreciating by 1.2% to N1,592.88, 3-month contracts by 2.0% to N1,663.99, 6-month contracts by 3.6% to N1,775.56, and 1-year contracts by 5.6% to N1,993.02 per US dollar, according to Cordros Capital.
In the parallel market, the naira traded at N1,660, widening the gap between official and informal rates to N117 per dollar. Analysts at Cordros Capital expect FX liquidity to remain constrained due to weak foreign portfolio inflows, despite the CBN's interventions.
December saw improved liquidity in the Nigerian Foreign Exchange Market (NFEM), aided by the introduction of the BMATCH trading platform and increased dollar sales from exporters. Reports from AIICO Capital revealed that the naira fluctuated between N1,500 and N1,693 during the month, closing the year at N1,535.82 per US dollar, reflecting an 8.18% appreciation.
Meanwhile, global oil prices showed strength, with Brent Crude trading at $80.29 per barrel and West Texas Intermediate (WTI) at $77.02 per barrel, signaling a potential boost to Nigeria's external reserves.
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