Naira strengthens FX liquidity boosts 1.58% gain as investor confidence rises, though oil volatility and bond market risks persist in Nigeria

Nigeria’s naira recorded a 1.58 per cent appreciation at the official foreign exchange market this week, driven by improved liquidity conditions and renewed investor confidence.

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The currency closed at N1,359.32 to the US dollar, reflecting a stronger performance supported by increased foreign exchange inflows and continued policy interventions by the Central Bank of Nigeria.

At the parallel market, the naira also posted modest gains, appreciating by 0.36 per cent to around N1,373 per dollar, indicating a slight narrowing of the gap between official and street exchange rates.

Market analysts attribute the improvement to better dollar supply and rising participation from foreign investors attracted by relatively high yields in Nigeria’s financial markets.

The positive sentiment has been linked to cautious optimism in the broader economy, although experts warn that structural weaknesses continue to pose risks to sustained recovery.

Oil price movements remain a key external factor influencing the currency’s outlook, given Nigeria’s heavy reliance on crude exports for foreign exchange earnings.

Volatility in global oil markets, driven by geopolitical tensions and supply uncertainties, is expected to weigh on future currency stability.

In the domestic fixed-income market, sentiment turned weaker as bond yields rose by 10 basis points to 15.89 per cent, reflecting reduced investor appetite and tighter liquidity conditions.

However, Nigeria’s Eurobond market showed relative strength, with yields declining by 33 basis points to 7.12 per cent, suggesting renewed foreign interest in the country’s external debt instruments.

Analysts say the divergence between local and external markets highlights mixed investor confidence, with offshore investors showing more optimism than domestic participants.

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Despite recent gains, economists caution that the naira’s recovery remains fragile and highly sensitive to external shocks and domestic structural challenges.