Market News

By Felix Oloyede

The foreign exchange market remained one of the major pressure points for the economy during July, as stronger demand from importers, manufacturers and foreign investors outpaced available dollar supply.

According to the July 2026 Macro and Market Insight by Meristem Research, the naira depreciated by 0.55 per cent month-on-month to an average of N1,374.61/$ in the official market, compared with N1,366.99/$ in June, despite almost $430m in Central Bank of Nigeria interventions, indicating that underlying demand for foreign currency remained strong.

Analysts from the investment firm noted the parallel-market naira also weakened by 1.25 per cent, averaging N1,409.73/$ during the month. Meristem, however, expects the currency to remain broadly stable in the near term, supported by CBN interventions, oil receipts and improved foreign portfolio inflows.

The report said the CBN’s newly introduced FX BDC Purchase Tracker could also improve transparency in the retail foreign exchange market by allowing real-time monitoring of foreign exchange sales to Bureau de Change operators. “Together, these measures should support a more orderly FX market over time,” the research firm said.

The report warned, however, that “lingering demand pressures from importers, manufacturers and foreign investors” could continue to weigh on the naira, particularly if global oil prices and financial conditions become less favourable.

Meristem expects the naira to remain broadly stable and oil production to continue improving in the coming months, while inflation is projected to moderate further.

Reacting to the report, Prof Adi Bongo of the Lagos Business School, who is an economist, noted, “Don’t need to worry about the movement in the Naira because the fundamentals are quite solid. So, we have to look at our external balances to make projections regarding where we see the naira falling by year-end.

“If the past were to be a good guide, in the past three years, let’s say about 18 months now. We’ve had the naira that has stabilised around a very narrow band. And the market premium, the black-market premium, has almost been eliminated. We’ve seen that convergence, which is thanks to the strict regulatory oversight of the central bank. Judging from the fundamentals, then there is no reason for any sort of anxiety regarding the naira.”

He explained that those minor fluctuations were linked to trading cycles.

“The major thing that may happen that gets us all concerned would be more geopolitical risks. Specifically, coming from the U.S.-Iranian conflict, the threat to Hormuz, and the price of oil. If that happens to really distort the price of the commodity significantly, then that is something that may worry us.

“But of course, the impact will not be immediately felt. The stability or the buffer that we have currently, we still carry the economy on towards the end of the year before we can see any impact coming from any, you know, geopolitical consequences,” he enunciated.

The Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, stated that it was okay for the CBN to periodically intervene in the foreign exchange market despite market forces determining the market.  “They will just periodically be entering the market, which is something that they will actually be doing. We expect that we’re going to have some either appreciation or devaluation; however, it will be within a particular threshold.

“Of course, the volatility won’t be that much. I think that one per cent depreciation is still acceptable because even if you check the CBN guidance, they give us an upper bound and the lower bound that they are working towards for the year.

“What you realise is that during this period, July, August, September, and even at times at the beginning of October, that is where there is always demand pressure on the currency for a lot of reasons. One, a lot of people are travelling for vacations; they will need funds for it. Some people are resuming school. They will need to actually even pay school fees, and some people always take this period as their period for medical tourism.”

The CBN’s external reserves have climbed to about $52.2bn, the highest level in 17 years, giving the monetary authority ample firepower to stabilise the market if needed.

Recent FMDQ data shows a sharp structural shift in FX activity: spot transactions fell 46.98 per cent to $1.96bn in the week ended August 14, while FX forwards jumped 263.56 per cent to $90.89m. Total weekly FX turnover dropped to $2.055bn from $3.729bn the prior week, suggesting traders are hedging rather than rushing for immediate dollars.

The naira has traded within a relatively narrow official range, closing the weekend at N1,358.25/$, supported by rising reserves and steady interbank activity.

Meanwhile, the report indicated that the country’s economic outlook strengthened in July as falling inflation, higher crude oil production, improving foreign investor sentiment and renewed activity in the capital market pointed to a gradual improvement in macroeconomic conditions, a new economic report has shown.

It warned that the recovery remained fragile, with food inflation, foreign exchange demand, high borrowing costs and geopolitical risks continuing to pose significant threats to the economy.

The report said headline inflation eased marginally to 15.91 per cent year-on-year in June from 15.93 per cent in May, while core inflation fell sharply to 15.92 per cent from 16.82 per cent.