Naira suffers biggest daily drop in 18 months, falls to N1,365/$

The naira recorded its sharpest single-day depreciation in about 18 months on Thursday, weakening by N28 against the US dollar to close at N1,365/$ at the official foreign exchange market.

Data from the Central Bank of Nigeria (CBN) showed that the currency fell from N1,337/$ recorded on Wednesday, October 21, representing a depreciation of approximately 2.1 per cent in one trading session.

The latest decline was the largest movement in the closing exchange rate since April 9, 2025, when the naira weakened by N29 to close at N1,644/$ from N1,615/$.

Thursday’s performance reversed the relatively narrow fluctuations recorded earlier in the week, with the currency closing at N1,334.99/$ on October 20 before weakening to N1,337/$ the following day.

During Thursday’s trading session, the exchange rate fluctuated between an intraday low of N1,336/$ and a high of N1,369/$.

The weighted average exchange rate rose to N1,344.40/$ from N1,334.72/$ recorded on Wednesday, while the simple average increased to N1,344.66/$ from N1,335.41/$.

Interbank transactions recorded 181 deals, with reported turnover standing at approximately N316.55 million.

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The depreciation stands out against the relatively modest movements recorded earlier in October, when the naira traded largely within the N1,330–N1,340/$ range.

The latest movement comes amid substantial foreign exchange demand and changing investment flows in Nigeria’s financial markets.

Analysis of Financial Markets Dealers Association data indicated that Nigeria’s foreign exchange demand reached a 15-year high of $18.34 billion in the second quarter of 2026, with demand for dollars particularly pronounced in services and financial payments.

At the same time, Nigeria’s portfolio investment rose by 45 per cent to $6.51 billion in the second quarter of 2026, according to an earlier Nairametrics report.

The increase in portfolio investment points to stronger foreign investment flows during the period, although such inflows can fluctuate depending on investor sentiment, returns and prevailing economic conditions.

Nigeria’s external reserves have also recorded significant growth. The reserves rose by $12.76 billion year-on-year to $54.61 billion as of September 14, 2026.

The reported level exceeded the CBN’s earlier projected year-end 2026 reserve level of approximately $51.04 billion, as reported by Nairametrics in December 2025.

Foreign exchange reserves provide a buffer for meeting external obligations and can support confidence in the currency market by strengthening the country’s capacity to meet foreign currency requirements.

However, higher reserves do not automatically prevent short-term exchange rate volatility, particularly when demand for dollars remains elevated.

The combination of rising foreign exchange demand, increased portfolio investment and stronger external reserves presents a mixed picture of Nigeria’s foreign exchange market.

While higher reserves provide additional external liquidity, sustained demand for dollars can continue to influence exchange rate movements.

Thursday’s depreciation alone, however, does not establish the specific factors responsible for the sharp decline. Further market data would be needed to determine the extent to which dollar demand, transaction flows or other market conditions contributed to the movement.

The naira’s performance in subsequent trading sessions will be important in determining whether Thursday’s decline represents a temporary adjustment or the beginning of a more sustained period of volatility.