Market News

The Nigerian naira came under renewed pressure in the foreign exchange (FX) market last week, weakening against the dollar as foreign exchange (FX) demand continues to outstrip supply, despite the Central Bank of Nigeria’s (CBN) interventions to stabilise the market.

The official exchange rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window slipped by 1.37 per cent on a week-on-week basis, to close at N1,475.35 per dollar.

The parallel market, often considered a more accurate reflection of real-time supply-demand dynamics, also witnessed a mild depreciation, with the naira falling by 0.61per cent to around N1,484 per dollar.

This divergence from last week’s resurgence underscores the persistent demand pressure within the FX ecosystem while also heightening caution in the face of limited FX liquidity.

Despite the currency pressure, Nigeria’s external reserves showed a modest but notable increase during the same period. The reserves rose by 0.19 per cent week-on-week, climbing to $42.67 billion from the previous week’s level of $42.59 billion.

This gain was largely attributed to consistent oil revenue inflows, enhanced non-oil foreign earnings and a strong trade surplus position, all of which have collectively supported the CBN’s FX market interventions and provided a cushion against external shocks.

The uptick in reserves suggests that, despite market anxieties, the broader macroeconomic framework remains supported by improving external sector fundamentals.

On the global commodities front, however, oil prices trended lower during the week, dampening investor sentiment and raising concerns over potential revenue headwinds for oil-dependent economies like Nigeria.

Brent crude, the international oil benchmark, traded at $60.84 per barrel at the time of reporting, while the U.S. benchmark, West Texas Intermediate (WTI), stood at $57.29 per barrel.

Both grades were on track for a weekly decline of around three per cent. The downward movement in oil prices was largely triggered by reports that U.S. President Donald Trump is preparing for high-level talks with Russian President Vladimir Putin in the coming weeks to broker a resolution to the ongoing Ukraine conflict.

The prospect of geopolitical de-escalation has tempered risk premiums in the oil market, thereby exerting downward pressure on prices. While the combination of FX market stress and falling oil prices raises fresh concerns about the naira’s near-term stability, the uptick in external reserves provides a degree of reassurance that Nigeria retains sufficient buffers to navigate volatility in the short term.

However, market watchers remain cautious, noting that the sustainability of FX interventions and the resilience of the naira will hinge heavily on the continued momentum of both oil and non-oil inflows, as well as broader geopolitical developments shaping global commodity markets.

An independent investor, Amaechi Egbo, expressed a cautious but optimistic outlook, noting that while the uptick in reserves offers some short-term reassurance, the naira’s resilience will ultimately depend on sustained growth in both oil and non-oil inflows. He warned that the CBN’s current intervention strategy, though helpful, may not be sufficient unless structural imbalances in the FX market are addressed.

Broader global developments, particularly those affecting commodity prices, will also continue to shape Nigeria’s economic outlook. He added that the near-term stability of the naira may be supported by the current external reserve levels, but market watchers stress that deeper reforms and improved investor confidence will be crucial to restoring lasting equilibrium in the FX market.

MEANWHILE, the Nigerian equities market sustained its bullish momentum this week, delivering a N1.26 trillion gain to investors as the All-Share Index (ASI) climbed to a fresh 52-week high.

The index rose by 1.35 per cent week-on-week to close at 148,977.64 points, approaching the key psychological threshold of 149,000 points. The impressive performance was underpinned by renewed buying interest in mid- and large-cap blue-chip stocks, coupled with strategic sectoral reallocation by investors who responded positively to moderating inflation and encouraging macroeconomic indicators.

Supporting the rally was the latest inflation data, which showed a slowdown in the headline rate to 18.02 per cent for September, reinforcing optimism about economic stability. As a result, the market capitalization of listed equities surged by N1.26 trillion week-on-week to N93.29 trillion, bringing the year-to-date (YTD) return of the NGX ASI to a robust 44.74 per cent.

Market breadth also remained positive, with 52 gainers outpacing 41 losers, reflecting broad-based investor confidence across all trading sessions. While sentiment was clearly upbeat, trading activity presented a mixed picture. The total volume of shares exchanged rose by 5.93 per cent to 2.42 billion units, suggesting increased participation.

However, the total value of transactions dipped by 15.53 per cent to N76.98 billion, down from N91.14 billion in the previous week. Additionally, the number of deals fell by 8.36 per cent to 126,744, indicating a more selective trading environment despite the positive momentum.

Sectoral performance was largely positive, with most indices closing in the green. The Industrial Goods and Insurance indices led the pack with respective gains of 2.79 per cent and 2.56 per cent, driven by sustained interest in sector leaders.

The consumer goods, commodities, and oil and gas indices also recorded modest gains of 1.93 per cent, 1.6 per cent and 0.04 per cent, respectively. However, the NGX banking index slipped slightly by 0.13 per cent, as slight profit-taking in tier-one lenders such as GTCO, Accesscorp and UBA moderated the sector’s overall performance.

According to analysts at Cowry Asset Management, the prevailing bullish sentiment in the market is likely to persist in the near term, driven by attractive stock valuations and continued investor interest in fundamentally sound companies.

However, they caution that overall market performance will remain highly responsive to broader macroeconomic developments and monetary policy cues from the Central Bank of Nigeria. In view of this, Cowry advises investors to maintain a strategic focus on equities with strong fundamentals and a track record of consistent earnings performance.