Nigeria FX Market: Dollar Demand Surges, Naira Slides Slightly in Festive Season

Nigeria FX Market: Dollar Demand Surges, Naira Slides Slightly in Festive Season

Nigeria’s foreign exchange (FX) market has experienced increased dollar demand as year-end “Detty December” spending intensified, placing mild pressure on the naira despite sustained interventions by the Central Bank of Nigeria (CBN) and rising external reserves.

The naira depreciated by 0.1 per cent week-on-week to N1,456/$1, as heightened holiday-related imports, international travel, and corporate year-end settlements offset a $250 million FX injection by the CBN and inflows from offshore investors.

Data from the apex bank showed that Nigeria’s gross external reserves rose for the 25th consecutive week, climbing by $396.84 million to $45.44 billion as of December 11. The increase has reinforced investor confidence and strengthened the country’s external buffers.

In the forwards market, the naira depreciated across 1-month (-0.4% to N1,485.97/$1), 3-month (-0.5% to N1,536.28/$1), and 6-month (-0.9% to N1,599.70/$1) contracts, while the 1-year contract appreciated slightly by 0.3 per cent to N1,726.89/$1.

Market analysts attributed the renewed pressure on the naira to seasonal FX demand, a trend typical of the festive period, while noting that inflows from diaspora remittances, inbound travel, and tourism spending could provide some support later in the month.

The Financial Markets Dealers Association (FMDA) noted that despite heightened demand, December also often sees improved foreign-currency inflows, which could strengthen the naira.

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The official FX market recorded a 1.73% month-on-month depreciation in November to N1,446.74/$1, reflecting a combination of rising seasonal demand and external pressures, including a stronger US dollar amid ongoing US–China trade tensions.

Domestic measures continued to support stability. The CBN retained the Monetary Policy Rate at 27%, while the Nigerian National Petroleum Company (NNPC) expanded naira-denominated crude sales to local refineries to curb domestic dollar demand.

In the parallel market, the naira weakened slightly to N1,476/$1 in late November, widening the gap with the official rate. Analysts, however, noted that the gap remains narrow, supported by steady diaspora remittances and moderated import demand.

Following a sharp devaluation two years ago, the naira has stabilized significantly, strengthening by N215.73 over the past year in the official market. The rollout of the CBN’s Electronic Foreign Exchange Management System has improved market transparency and price discovery.

As of December 2, 2025, the naira had appreciated by 14.93% year-on-year to N1,445.39/$1, but analysts caution that its stability remains vulnerable to structural external sector weaknesses and global oil market volatility.

“Strong net FX liquidity, a positive current account position, and rising external reserves continue to underpin investor confidence. Combined with slow import demand growth, we expect the naira to remain broadly stable in the near to medium term,” said analysts at Cordros Research.

Nigeria FX Market: Dollar Demand Surges, Naira Slides Slightly in Festive Season