The Nigerian naira is showing signs of cooling off against the British pound amid growing demand for naira-denominated assets and intensified interventions by the Central Bank of Nigeria (CBN) to manage dollar liquidity in the domestic foreign exchange market.
Latest official data from the CBN indicated that the naira traded at approximately N1,842/£1, marking a psychological break below the N1,900/£ level that had acted as resistance for much of 2025 and early 2026. Analysts note that this technical shift underscores increasing investor confidence in naira assets.
The central bank has stepped up its “mop-up” operations, aimed at removing excess dollars from the banking system to support naira stability. These measures have contributed to modest upward movement of the naira in the official window this year.
While a stronger naira is generally positive, rapid appreciation can unsettle the market, prompting foreign portfolio investors to take profits, which could lead to significant dollar outflows.
The CBN’s mop-ups are designed to reduce such volatility while simultaneously targeting a boost in Nigeria’s external reserves to $51 billion by the end of 2026.
By buying dollars in large volumes, the CBN increases its intervention capacity for future market stabilization. The mop-up strategy also helps narrow the spread between the official and parallel markets to below 1%, reducing opportunities for “round-trip” trading where traders exploit differences between market rates.
The bank has also targeted excess naira liquidity, which currently exceeds N52 trillion held in the Standing Deposit Facility (SDF), preventing excess naira from fueling additional dollar demand and potential depreciation.
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In addition, the CBN has aggressively used Open Market Operations (OMO), increasing auction volumes sixteen-fold. January OMO sales reached N8.53 trillion, compared to N500 billion a year earlier, further draining excess liquidity and reducing speculative pressure on the naira.
Meanwhile, the British pound remains under pressure against the US dollar amid broader dollar strength and mounting fiscal concerns in the United Kingdom. On Tuesday, the GBP/USD pair dropped nearly 0.70% to trade around 1.3047, marking its lowest level since April 11.
The US Dollar Index (DXY), which tracks the dollar against six major currencies, has extended a five-day winning streak to reach a three-month high of 100.08.
The pound’s decline has been fueled by pre-budget signals from UK Chancellor Rachel Reeves, who indicated “hard choices” on national debt, business-rate reforms, and potential tax increases ahead of the November 26 fiscal announcement.
Additionally, US trade policy shifts have increased volatility for the pound, particularly following President Donald Trump’s announcement of a 15% global tariff hike after a Supreme Court ruling, raising concerns about long-term economic implications for UK trade.
Technical analysis shows the GBP/USD rate forming a “falling wedge” pattern. Investors are monitoring closely for a potential breakout toward four-year highs if the pound can sustain levels above $1.3434.
For Nigeria, the strengthening naira, supported by CBN interventions and robust demand for local assets, signals a potential period of stability, although experts caution that sustained management of liquidity and careful policy calibration will be critical to avoid abrupt market shocks.