Building on improved activity in the foreign exchange market, total turnover at the Nigerian Foreign Exchange Market (NFEM) interbank window rose by $380 million, or 15.8 per cent, to $2.787 billion in the week ended June 26, despite a depreciation of the naira across both the official and parallel market segments.
Data from the Central Bank of Nigeria (CBN) showed that turnover at the NFEM increased from $2.407 billion recorded in the previous week to $2.787 billion, reflecting heightened activity in the foreign exchange market.
However, increased market activity was insufficient to prevent the local currency from weakening against the United States dollar during the review period.
At the official market, the naira depreciated by 0.76 per cent, falling from N1,370.45/$ at the beginning of the week to N1,380.93/$ at the close of trading. Similarly, the currency lost 1.08 per cent at the parallel market, where it settled at N1,388 per dollar.
Despite the weaker performance of the domestic currency, analysts expressed optimism that the naira could regain some strength in the near term as Nigeria’s external reserves continue to grow and foreign-exchange market pressures begin to ease.
Nigeria’s external reserves rose by 0.37 per cent week-on-week to $51.25 billion, supporting the country’s external liquidity position and boosting market confidence.
Meanwhile, global crude oil prices were on course to record significant weekly losses amid easing geopolitical tensions in the Middle East and improved tanker movements through the Strait of Hormuz.
As of the weekend, Brent crude traded at $72.98 per barrel, while West Texas Intermediate (WTI) stood at $69.55 per barrel. Nigeria’s Bonny Light crude also declined by 10.93 per cent week-on-week to close at $72.70 per barrel.
Although reports of an Iranian strike on a commercial vessel in the Strait of Hormuz briefly lifted oil prices by about two per cent, the gains proved short-lived as investors remained optimistic about the continued normalisation of shipping activities in the region.
However, concerns over renewed tensions persisted after the United States Central Command disclosed that its forces carried out fresh strikes against Iran on Saturday. In a statement, the Command said the strikes were undertaken “in direct response to continued Iranian aggression against commercial shipping” and targeted Iranian military surveillance, communications, air defence systems, drone storage facilities and mine-laying installations.
Looking ahead, analysts at Cowry Assets Management projected that the naira could remain under pressure in the short term due to persistent foreign exchange demand, although stronger external reserves are expected to moderate excessive volatility.
The analysts also forecast continued volatility in crude oil prices as investors monitor geopolitical developments, global demand trends and production decisions by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+).
Similarly, analysts at Cordros Research expressed optimism that foreign exchange market pressures would ease in the coming weeks.
According to the firm, “we expect near-term forex demand pressures to ease gradually as seasonal summer-related forex demand moderates, providing some support for exchange rate stability. This, alongside sustained official forex liquidity provision and resilient autonomous market supply, is expected to cushion the market and limit disorderly movements.”
