CBN injects $150m FX intervention sales to fuel Naira appreciation

Central Bank of Nigeria (CBN) injected $150 million into the foreign exchange (FX) market to help the naira exchange rate redirection. The Apex Bank sold U.S dollar to local deposit money banks on the back of fluctuating demand for foreign currencies, especially the dominant US dollar. “It’s important to note that the intervention by the apex bank does not signal a return to a fixed exchange rate regime, nor an attempt to defend the naira at a particular level. Rather, the current framework permits discretionary interventions when temporary imbalances/market distortions arise. One such instance was the panic triggered by President Donald Trump’s Liberation Day announcement, where global trade tariff concerns, rather than domestic fundamentals, drove volatility,” TrustBanc Financial Group Limited said in a recent update. Last week, Nigeria’s foreign exchange market (NFEM) opened with persistent selling pressure as offers outweighed demand, driving the pair below the ₦1500/$ level.
FX traders at AIICO Capital Limited said weak bids and strong supply from offshore players and exporters reinforced the bearish tone, with NAFEX fixing dropping to ₦1502.56 per dollar. By midweek, liquidity eased as supply slowed and offers thinned, while the Apex Bank stayed on the sidelines.  However, demand returned strongly later in the week, led by portfolio investors and corporates. This forced the CBN to intervened, and dollar was sold to banks within the ₦1491.50–₦1509.00 range, AIICO Capital Limited revealed. The improved dollar supply and CBN participation supported the Naira on Friday, which strengthened spot rate to close at ₦1487.8962/$, appreciating 90bps week on week. In the parallel market, the naira closed at N1520, with midweek fluctuation triggered by imbalance between demand and supply. “With reserves rising, spreads narrowing, and foreign confidence stabilizing, the conditions are aligning. But it is sentiment, not just supply, that ultimately decides how long the floor holds”, TrustBanc Financial Group Limited said in a commentary note.
Foreign reserves also climbed by about $299.7 million to $41.99 billion. The naira is likely to remain stable in the near term, supported by improved US dollar supply, FX traders said. In the near term, analysts at Cordros Capital Limited said they expect the naira to remain stable, underpinned by resilient FX market liquidity and improving domestic inflows. “Prospective portfolio inflows are likely to benefit from the dovish shift in global monetary policy and the accompanying decline in treasury yields, which could enhance investor appetite for naira-denominated assets. At the same time, stronger non-oil export receipts and reduced incentives for speculative positioning should reinforce the positive momentum and suggest a more balanced FX market outlook”, the firm said. Oil prices slipped on Friday as concerns over abundant supply and weakening demand overshadowed optimism that the Fed’s first rate cut of the year might boost consumption. Brent crude fell 76 cents, or 1.1%, to $66.68 a barrel, while U.S. WTI lost 89 cents, or 1.4%, to close at $62.68.
Gold, meanwhile, extended its rally, heading for a fifth consecutive weekly advance. Spot gold rose 0.8% to $3,672.08 per ounce, while U.S. gold futures gained 0.7% to $3,705.80, as investors awaited further signals from the Fed. While lower borrowing costs typically stimulate oil demand and support prices, the recent 25bps Fed rate cut may have limited impact on oil markets, potentially weakening the U.S. dollar further and offsetting any demand boost. For a meaningful uplift in oil demand, more aggressive easing, such as a 50bps cut, may be necessary, AIICO Capital Limited stated in a commentary note