In March, the naira (NGN) experienced a notable decline against the US dollar (USD) across both official and parallel foreign exchange markets, despite significant interventions from the Central Bank of Nigeria (CBN). The naira depreciated by 3%, even as the CBN injected more than $1 billion into the official market to stabilize forex inflows.
The rise in demand for US dollars put significant pressure on the exchange rate, causing the naira to struggle against the greenback. Without the CBN’s aggressive FX interventions, analysts suggest that the naira’s performance could have been worse in March.
CBN’s Support Helps Stabilize the Official Window
During the final week of March, the official forex window saw relative stability, aided by an increased dollar supply from the CBN. Early in the week, the CBN sold $41.6 million, with exchange rates fluctuating between N1,527.50 and N1,531. This action helped curb further volatility in the market.
Midweek, the CBN injected an additional $27.9 million, with the NGN/USD exchange rate trading within a narrow range. By the end of the week, rates ranged from N1,520.00 to N1,542.00, with the naira showing a slight week-on-week appreciation of 0.5 basis points, closing at N1,536.82.
Market Overview: CBN Injects $1.03bn in March
Throughout March, the CBN supported the market with a total of $1.03 billion, yet the official exchange rate still saw a 3% depreciation, ending at N1,536. The parallel market fared similarly, with a 3.23% drop, reaching N1,550. Despite the downturn, the year-to-date gains were positive, with the official rate up 0.09% and the parallel market up 6.13%, as reported by TrustBank Financial Group Limited.
FX Reserves Decline, Forward Contracts See Naira Appreciation
The nation’s foreign exchange reserves declined for the second consecutive week, dropping by $913.14 million to $38.33 billion. Meanwhile, in the forwards market, naira rates saw an increase across various contracts. The 1-month FX forward contract appreciated by 0.5% to N1,572.44, the 3-month contract rose by 1.3% to N1,635.09, the 6-month contract climbed by 2.4% to N1,727.16, and the 1-year contract surged by 4.8% to N1,899.27 per dollar.
Market Outlook: CBN to Continue Liquidity Support
Experts predict that the CBN will likely maintain its support for market liquidity, particularly amid weaker Foreign Portfolio Investment (FPI) participation in the FX market. This intervention is expected to help maintain stability for the naira in the short term.
Global Oil and Gold Prices: A Mixed Outlook
On the global stage, oil prices dipped on Friday amid concerns that ongoing U.S. tariff disputes could trigger a global recession. However, prices still remain on track for a third consecutive weekly gain, largely due to rising U.S. pressure on Venezuela and Iran. Brent crude futures fell by 0.6%, settling at $73.54 per barrel, while WTI crude dropped 0.9% to $69.31. Meanwhile, gold surged to a record high as investors flocked to safe-haven assets in response to escalating trade war fears.
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