Naira weakens amid persistent Dollar demand despite rising reserves

Naira weakens by 0.99% against the dollar despite growing external reserves, as analysts anticipate cautious FX market stability

The naira weakened by 0.99 per cent at the official Nigerian Foreign Exchange Market, closing at N1,456.72/$ on Friday, down from N1,442.43/$ the previous week, as sustained dollar demand pressured the currency.

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In the parallel market, the naira traded weaker between N1,470/$ and N1,475/$.

Cowry Assets Management Limited noted that the currency fluctuated within a wider trading band, “moving between N1,440 and N1,460 at the official window as softer inflows met firmer dollar demand.”

By week’s close, the firm said the naira had “weakened by 0.98 per cent to close at N1,456.72 per dollar.” AIICO Capital similarly observed a bearish trend, “pressured by strong early demand from investors seeking to cover positions,” with the trend sustained despite multiple Central Bank of Nigeria (CBN) interventions.

Despite the volatility, Nigeria’s external reserves rose modestly to $44.19bn as of Thursday, up from $43.64bn on 14 November, reflecting a 1.26 per cent increase.

Cowry Assets attributed the gains to “stable oil receipts, stronger non-oil inflows, and a sustained trade surplus,” which support the CBN’s efforts to maintain market stability.

Analysts forecast a cautious but steady FX market in the coming week.

Cowry Assets projected that “pricing is being shaped by lighter supply rather than any fundamental shift in sentiment,” suggesting continued bouts of pressure unless inflows increase meaningfully.

AIICO Capital echoed a near-term stabilisation outlook, while Afrinvest highlighted the currency’s resilience, noting that “sixth consecutive monthly appreciation aided mainly by CBN’s market reforms” has contributed to disinflation.

Afrinvest also linked FX stability to broader economic policy, cautioning that the sustainability of gains would depend on “effective management of FPI sentiment around controversial changes to CGT, set to take effect in 2026.” The firm anticipates a dovish stance from the Monetary Policy Committee at its 24–25 November meeting, with a potential 25–50 basis points rate cut expected to sustain bond rallies while having limited equity market impact.

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The naira’s performance this week underscores ongoing structural pressures in Nigeria’s foreign exchange market, while rising reserves offer a stabilising buffer as policymakers and investors navigate currency volatility.

David Okere