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The Nigerian currency, naira, struggled at the official window in the past week, depreciating by 1.25% week-on-week to settle at 1536.89/$ on Friday. According to data from the Central Bank of Nigeria (CBN), the naira started the week on a weak note at 1,528.03/$, down from 1,517.93/$ in the previous trading session.

The naira depreciated further to 1532.93/$ before regaining some strength on Wednesday and Thursday. However, by Friday, it had fallen to 1536.89/$1. The depreciation occurred amid reports that negotiations on the naira-for-crude agreement between the Nigerian National Petroleum Corporation Limited (NNPCL) and local refineries had stalled.

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Experts warn that the halt in naira sales by Dangote Petroleum Refinery could increase pressure on the foreign exchange market, as dealers would now have to source large amounts of US dollars to purchase petroleum products. “Looking ahead, we anticipate a mixed outlook for the naira as demand pressures for the greenback intensify, with FX users and speculators continuing to exploit arbitrage opportunities,” experts at Cowry Assets Management Limited said

At the parallel market, the local currency gained N12 against the dollar, appreciating by 0.77% week-on-week to close at an average of N1,568 per dollar. Researchers at Afrinvest reported that the naira closed at 1565/$ in the parallel market. For its weekly outlook, Afrinvest projected a stable naira, “underpinned by continued CBN intervention.”

Meanwhile, CBN foreign reserves declined by 0.06% from $38.37bn to $38.35bn as of Thursday. Researchers at Cowry Assets Management attributed the decline to the CBN’s continued efforts to defend the local currency amid minimal foreign exchange inflows into the economy.

The decline in foreign reserves is a concern, as Nigeria’s heavy reliance on oil revenue to support FX reserves makes it vulnerable to external shocks, including geopolitical tensions that influence oil supply and pricing. In the past week, the benchmark Brent crude oil price advanced by 3.0% week-on-week to settle at approximately $85.00/bbl, according to Reuters.

With Nigeria’s oil revenue expected to remain under pressure, the naira’s stability will depend on the CBN’s ability to sustain its weekly interventions and address the country’s prolonged FX challenges. As analysts note, “these interventions may only provide temporary relief without structural reforms to address Nigeria’s FX challenges

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