The Nigerian naira is experiencing significant depreciation as the Central Bank of Nigeria (CBN) shifts its focus towards external reserves, compromising the local currency's value. The CBN, which previously maintained that the naira was undervalued, has begun selling U.S. dollars to banks at approximately ₦1,640 per dollar, establishing a new valuation range between ₦1,600 and ₦1,700.
As the week concluded, the naira further weakened, closing at ₦1,678.87 per dollar in the official market. The CBN's recent foreign exchange auctions have seen increasing rates, with the FMDQ Exchange reporting a drop of ₦39.37 in a single session, representing a 2.4% depreciation from the previous day's rate of ₦1,639.50.
Demand for U.S. dollars has surged amid a supply shortage, leading to a total daily FX turnover of $1,403.76 million on Friday, a sharp increase from $244.96 million on Thursday. Within the Investors' and Exporters' (I&E) window, the naira fluctuated between ₦1,698.50 and ₦1,609.00 to the dollar, indicating ongoing market volatility.
Despite minor improvements in U.S. dollar liquidity in the autonomous FX market, demand pressures persist in the interbank sector. Spot FX rates for eligible users ranged from ₦1,591.60 to ₦1,705.00 per dollar, and a limited CBN intervention, where approximately $51 million was sold at ₦1,640, had little effect on the currency's decline. By the end of the week, the naira had depreciated by 0.73% in the Nigerian Autonomous Foreign Exchange Market (NAFEM) window.
This decline has weakened the naira's competitive position against other African currencies, eroding previous exchange rate advantages in markets like Benin Republic and Ghana. The CBN continues to face economic pressures amid rising FX demand.