Naira weakens at black market despite rise in official inflows

The Nigerian naira weakened against the U.S. dollar in the unofficial market during midweek trading, even as improved fundamentals buoyed sentiment in the official foreign exchange window.

At the parallel market, the naira slipped to ₦1,620 per dollar on Wednesday, compared to ₦1,605 recorded the previous day, reflecting renewed pressure on the local currency despite growing optimism among forex market participants.

Market activity revealed that the naira’s spot value remained stronger than traders had earlier projected in the forward contracts, buoyed by increased liquidity in the Nigerian Autonomous Foreign Exchange Market (NAFEM) and a weakening U.S. dollar on the global stage.

Encouragingly, inflows through the NAFEM window rose to $847 million during the week, up from $795 million recorded the previous week.

The Central Bank of Nigeria (CBN) accounted for 22.87% of the total inflows, while Foreign Portfolio Investors (FPIs) contributed the largest share at 32.26%. Non-bank corporates brought in 22.0%, exporters 17.97%, and other sources made up 40.9% of total transactions.

Despite the black market depreciation, analysts pointed to positive undercurrents, including crude oil transactions conducted in naira with nearby refineries, which helped alleviate some of the pressure on dollar demand.

Forward market data, however, showed cautious sentiment among traders. The one-month forward closed at ₦1,670.42 per dollar, the three-month forward at ₦1,752.18, and the six-month forward at ₦1,870.78.

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Looking ahead, the one-year forward contract settled at a much weaker ₦2,087.66 per dollar, highlighting lingering concerns about Nigeria’s currency trajectory.

Globally, broader macroeconomic factors have also impacted the naira’s performance.

Ongoing trade tensions between the United States and China, coupled with fears of a global recession, have weighed heavily on crude oil prices, which traditionally bolster Nigeria’s forex earnings. Currently, crude oil prices sit roughly $10 below the Federal Government’s benchmark, further dampening naira prospects.

Meanwhile, the U.S. dollar remains under pressure. Although it recovered slightly from a seven-month low against the yen, the greenback is on track for its fourth consecutive weekly decline.

Market confidence in the dollar continues to erode amid lingering fallout from trade tariffs introduced under former President Donald Trump, w

Technical indicators reinforce the bearish sentiment around the dollar. The U.S. Dollar Index hovered around the 99.5 which have been inconsistently applied and delayed.

As a result, rival currencies such as the euro and yen have surged approximately 5% against the dollar in a little over two weeks. The euro, while easing slightly, was last seen trading at $1.1373. support level on Thursday, with the Moving Average Convergence Divergence (MACD) flashing a persistent sell signal via new red histogram bars.

Meanwhile, the Relative Strength Index (RSI) stood at 27, firmly in oversold territory, suggesting continued downside risk unless the index can reclaim the 100.5 level.

Against this complex backdrop of domestic improvement and external volatility, Nigeria’s currency market is likely to remain highly sensitive in the coming weeks