The Central Bank of Nigeria (CBN) last week intervened in the foreign exchange market, purchasing about $190 million to temper the rapid appreciation of the naira at the official window. The move marked a rare dollar-buying action by the apex bank, aimed at moderating gains recorded by the local currency in recent weeks. After a strong rally, the naira retreated during the final three trading sessions of the week, which closed on Friday. Market analysts had cautioned that sustained appreciation could trigger an exit by foreign portfolio investors from the fixed-income market, as currency gains may prompt profit-taking and increased demand for the US dollar.
Analysts warned that a sell-off in investment securities could spike dollar demand, potentially straining the market and accelerating capital outflows. Despite limited direct FX intervention prior to last week's action, the naira had maintained relative stability against the greenback.
"To avoid rocking the boat," the CBN stepped in to absorb excess dollar supply, effectively slowing the pace of the currency's appreciation.
According to TrustBanc Financial Group Limited, the apex bank purchased $189.80 million during the week. The firm said the intervention was designed to absorb surplus liquidity and moderate the naira's gains.
The investment house reported that the currency strengthened across both segments of the market. At the official window, the naira appreciated by N9.09 week-on-week to close at N1,346.32/$, while the parallel market gained N60.00 to settle at N1,340/$.
TrustBanc further noted that the foreign exchange spread narrowed sharply to 0.47 per cent from 3.29 per cent the previous week, indicating stronger convergence between the official and parallel market rates.
On the macroeconomic front, analysts attributed the currency's resilience to firmer oil prices, rising external reserves and reform-driven capital inflows, even as geopolitical risks persist.
