Naira defies pressure, ends February below N1,500 per dollar

• Published On: 03 March 2025 at 07:10

The naira closed February 2025 with an 8.5% month-on-month gain on the parallel market, closing at 1,490/$, while the official market closed at 1,500/$, indicating a 1.7% month-on-month decline.

According to the Afrinvest Monthly Market Report, the foreign reserve decreased by 3.2% month on month. As of Thursday, the figure was $38.46 billion.

"This decline can be linked to CBN's efforts to stabilise the naira, particularly through the resumption of payments for the verified portion of the outstanding $7.0bn foreign exchange backlog," the economists claimed.

They went on to indicate that "in March, we anticipate the naira will maintain its positive performance across FX segments, supported by the CBN's continued USD supply to BDCs and DMBs, provided there are no adverse market shocks."



In the foreign exchange market, the naira has shown mild strength against the US dollar, hovering around the N1,500 band in both segments of the market recently.

Cowry Asset Research highlighted the factors driving the market, stating that in the past week, the Nigerian oil benchmark, Bonny Light crude, traded in a weak region on the international oil market, losing $2.36, or 3.2%, week on week to close at $75.88 per barrel on Thursday.

"This decline was primarily caused by weak global demand, which weighed on crude prices across the board. The sustained pressure on oil prices has resulted in lower dollar inflows into Nigeria's economy, affecting the country's foreign exchange reserves. As a result, forex reserves fell by $240 million, or 0.61 percent, week on week, reflecting lower oil earnings and highlighting the country's ongoing foreign exchange liquidity challenges.

"At the official window, the local currency rose by 93 kobo against the dollar, closing at N1,500.15 per dollar." Meanwhile, in the parallel market, the naira rose N5 to settle at an average of N1,490 per dollar, as demand pressure eased slightly.

On the outlook for the week, the analysts said, "In the coming week, we anticipate a continued battle for stability in the forex market as the central bank intensifies efforts to defend the naira. With the CBN expected to take more decisive steps to support the local currency, such as tightening liquidity and improving forex supply mechanisms, the naira may gain further ground against the dollar in the coming week."

Experts have previously highlighted some of the threats to the naira's stability, such as an increasing debt burden, a sustained decline in foreign reserves, and high inflation rates. They argue that these factors threaten to undermine the potential benefits of ongoing foreign exchange reform.