Market News

By : Helen Oji

The naira weakened slightly against the dollar last week, declining by 0.7 per cent in the official foreign exchange market to close at N1,371.04/$.

The local currency also depreciated in the parallel market, shedding about 36 basis points to close at N1,370.13 per dollar, closing the market arbitrage gap.

The depreciation comes at a time when businesses and manufacturers continue to grapple with high import costs, elevated production expenses and limited access to foreign exchange, factors analysts said are worsening inflationary pressures and weakening investor confidence in the broader economy.

Although Nigeria’s external reserves recorded a marginal increase of 0.19 per cent to $48.54 billion in the week, analysts said the improvement remains insufficient to significantly strengthen market liquidity or ease pressure on the naira due to persistent FX by importers, manufacturers, airlines and other market participants.

Financial analysts said it would continue to face structural challenges driven by inadequate dollar inflows, weak capital importation, declining foreign portfolio investment and continued dependence on oil receipts for external earnings.

In the global oil market, crude prices surged strongly during the week amid escalating geopolitical tensions involving Iran and growing concerns over possible supply disruptions in the Middle East. Brent crude was on track for a weekly gain of nearly six per cent after comments by President Donald Trump signalled increasing impatience with Iran despite reports that about 30 vessels had recently transited through the Strait of Hormuz, one of the world’s most strategic oil shipping routes.

At the close of trading, Brent crude advanced by 3.24 per cent to $109.2 per barrel, while the United States West Texas Intermediate gained 3.73 per cent to settle at $104.9 per barrel.

Nigeria’s Bonny Light crude also posted strong gains, rising by 5.99 per cent to close at $116.99 per barrel.

Analysts said the rise in crude oil prices offered temporary support for Nigeria’s fiscal position and external reserves through improved export earnings and increased foreign exchange inflows.

However, they warned that the gains remained highly vulnerable to geopolitical shocks, global demand uncertainties and fluctuations in international energy markets.

They added that despite stronger oil prices, the naira could remain under pressure in the near term because FX continued to outpace supply in the official market, while confidence in the currency remains weak.

Meanwhile, bearish sentiment persisted across Nigeria’s fixed-income market as the secondary bond market extended its losses amid weak investor demand and increased selloffs across most maturities.

Trading activity remained subdued throughout the week as investors adopted a cautious approach in response to inflation concerns, liquidity pressure and uncertainty surrounding future monetary policy direction.