Naira holds ground despite global dollar weakness as forex pressures persist

The Nigerian naira exhibited minimal movement in the foreign exchange market on Tuesday, resisting a broader decline of the U.S. dollar globally.

Despite continued foreign exchange market reforms, the naira remains under pressure due to weak oil revenues and limited foreign currency inflows.

In the unofficial market, the naira appreciated slightly, settling at N1,565 per dollar from Monday’s rate of N1,570/$.

However, official market data from the Central Bank of Nigeria (CBN) showed a depreciation, with the naira closing at N1,536.15/$ compared to N1,530.15/$ on Tuesday.

“Despite the CBN’s reforms aimed at improving transparency and attracting foreign investment, the fundamental issue remains: weak foreign exchange inflows,” said financial analyst Adebayo Olayemi. “Without stronger oil revenues and diversified sources of forex earnings, the naira will continue to struggle.”

Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shows a decline in crude output from 1.54 million barrels per day (bpd) in January to 1.47 million bpd in February, below the Organization of the Petroleum Exporting Countries’ (OPEC) allocation of 1.5 million bpd.

This shortfall translates to a loss of approximately 2.1 million barrels over the month.

Experts attribute the declining output to underinvestment in energy infrastructure, oil theft, and vandalism. These challenges have further strained Nigeria’s foreign reserves and limited the CBN’s ability to stabilize the naira.

Despite these challenges, global policy institutions see some benefits in the naira’s depreciation.

A recent report from Chatham House suggests that the weaker naira has improved Nigeria’s balance of payments, leading to an increase in capital inflows.