- Naira weakened against the US dollar despite rising external reserves nearing $46 billion
- Analysts warn of continued FX pressure amid global trade tensions and cautious investor sentiment
- Gold prices surge as investors seek safety amidst geopolitical uncertainties impacting global markets
Nigeria’s foreign exchange market delivered a mixed signal on Friday as the naira weakened against the US dollar despite a fresh rise in the country’s external reserves to nearly $46 billion.
The divergence highlights the persistent structural pressures in the FX market, even as macro buffers show gradual improvement.
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Naira weakens at official and parallel markets
At the official foreign exchange window, the naira depreciated by 0.21 per cent to close at N1,421.63 per dollar.
Intraday trading showed even sharper weakness, with the currency shedding about 0.72 per cent by the end of the session as FX demand outweighed available liquidity.
The parallel market mirrored this trend. The naira slid to around N1,475 per dollar, reflecting sustained demand pressure from importers, businesses, and individuals seeking hard currency outside the official system.
Market participants say the widening gap between demand and supply continues to fuel volatility across segments of the FX market.
Payments, global risks weigh on FX liquidity
Analysts attribute the latest depreciation to a combination of FX payments, cautious investor sentiment, and broader geoeconomic uncertainties. Rising global trade tensions, driven largely by the United States’ increasingly protectionist stance, have added to risk aversion across emerging and frontier markets.
Some market projections warn that the naira could face further pressure in the coming months, particularly if financial market developments trigger selloffs in naira-denominated assets.
Concerns around capital gains taxation and portfolio rebalancing have also featured in investor conversations, limiting near-term inflows.
External reserves offer a partial cushion
In contrast to currency movements, Nigeria’s external reserves edged higher. Data from the Central Bank showed reserves rose by about 0.20 percent to $45.99 billion. The increase was supported by steady oil receipts, stronger non-oil inflows, and the country’s trade surplus.
Cowry Asset Management noted that while rising reserves provide a degree of support, they may not be sufficient on their own to stabilise the naira. The firm expects the currency to remain under pressure in the near term due to structural FX imbalances and elevated demand, even as reserves continue to improve.
Oil prices climb on geopolitical tensions
Global oil prices added another layer of complexity to the outlook. Crude settled at its highest level in more than a week after fresh US sanctions on vessels transporting Iranian oil and comments by President Donald Trump about a naval armada heading toward the Middle East heightened geopolitical risks.
Brent crude traded around $64.50 per barrel, while US West Texas Intermediate rose to $59.78, reversing earlier losses linked to easing US–Europe trade tensions. Bonny Light crude, however, slipped 1.21 percent to $67.61 per barrel amid concerns about potential supply disruptions tied to Iran.
Gold Surges as Investors Seek Safety
Beyond oil, gold prices rallied sharply as investors flocked to safe-haven assets. A softer dollar, policy uncertainty, and continued central bank accumulation pushed the precious metal closer to the psychologically important $5,000 level.
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Market analysts say geopolitics remain front and centre in shaping global capital flows. Recent shifts in Venezuela’s oil sector and the United States’ growing influence over Latin American OPEC supply are also reshaping energy markets, with implications for crude benchmarks and currency dynamics worldwide
Naira posts best run in a decade as CBN reforms impact FX
We earlier reported that the naira delivered its strongest annual performance in more than 10 years in 2025, appreciating by over 7 per cent against the United States dollar as sweeping foreign exchange reforms by the Central Bank of Nigeria began to reshape market confidence.
Recent data from the apex bank showed that the local currency strengthened by 7.4%, or N105.61, to close at N1,435.75 per dollar on the final trading day of 2025, compared with N1,541.36 at the start of the year.
The gain marked a sharp turnaround from years of sustained pressure and volatility in the foreign exchange market.