Market News

…External reserves decline to $54.9bn The naira weakened to a 10-month low of N1,430 per dollar in the parallel foreign

BY  Hope Moses-Ashike

…External reserves decline to $54.9bn

The naira weakened to a 10-month low of N1,430 per dollar in the parallel foreign exchange market on Wednesday, as seasonal demand for the greenback gathers momentum ahead of the festive season and amid election-related spending.

Foreign exchange data collated from currency exchangers showed that the dollar was quoted at N1,430 on Wednesday, compared with N1,410 and N1,425 on Monday and Tuesday, respectively.

The depreciation widened the gap between the official and parallel market exchange rates to about N80 per dollar, or 5.93 percent, from N66, or 4.89 percent, on Monday, reflecting renewed pressure in the informal FX market.

At the Nigerian Foreign Exchange Market (NFEM), the naira also weakened, depreciating by N1.52 as the dollar was quoted at N1,350.86 on Tuesday, compared with N1,349.34 on Monday, according to data published by the Central Bank of Nigeria (CBN).

A currency trader attributed the renewed pressure on the naira to seasonal demand for foreign exchange, noting that demand typically increases ahead of the festive season, while election-related spending could further intensify pressure on the market.

Market activity, however, improved significantly, with total turnover at the NFEM window surging by 120.59 percent to $813.54 million on Tuesday from $368.79 million recorded on Monday. The number of deals also increased by 25.83 percent to 341 from 271 over the same period.

In the interbank segment of the foreign exchange market, total turnover rose by 17.92 percent to $248.07 million on Tuesday from $210.38 million on Monday. The number of deals increased by 24.14 percent to 144 from 116.

Meanwhile, Nigeria’s external reserves, which provide the CBN with the capacity to defend the naira and meet the country’s external obligations, declined by $330 million to $54.93 billion as of November 9, 2026.

The decline represents a 0.59 percent contraction from the $55.26 billion peak recorded on October 27, 2026, according to data published on the CBN website. Despite the recent moderation, reserves remain significantly higher than the $43.37 billion recorded in the corresponding period last year, representing a 26.65 percent increase.

However, a report by Quest Merchant Bank indicates that Nigeria’s external reserves recorded further accumulation in October, reflecting stronger underlying foreign exchange inflows.

According to the bank, gross external reserves increased by $295 million month-on-month to $55.2 billion at the end of October 2026, extending the steady accumulation trend observed throughout the year.

The increase brought cumulative reserve accretion since the beginning of 2026 to $9.7 billion, reflecting an improvement in the country’s external position.

Quest Merchant Bank attributed the reserve growth to elevated crude oil prices, improving oil production, resilient remittance inflows and sustained access to external financing.

It noted that Nigeria’s gross external reserves remained at their highest level in 18 years, providing an important buffer against external shocks.

On a gross basis, the reserves provided approximately 15.8 months of merchandise import cover and 10.5 months of total import cover, including services.

Despite the stronger reserve position, the naira depreciated by approximately 1.2 percent month-on-month to N1,346 per dollar at the NFEM window in October, reflecting stronger seasonal foreign exchange demand and foreign portfolio investment-related outflows.

The bank said the relative resilience of the reserves suggested that underlying foreign exchange inflows remained sufficiently strong to accommodate elevated market demand without materially weakening the country’s external buffers.

Comparing Nigeria with other African economies, Quest Merchant Bank said Egypt’s net international reserves increased by $152 million month-on-month to a record $57.5 billion, supported by continued capital inflows and remittance receipts.

In contrast, South Africa’s international liquidity position declined by $709 million month-on-month to $71.5 billion, extending the moderation recorded in recent months.

Among the three economies, Nigeria recorded the strongest reserve accumulation in the year, with an increase of $9.7 billion, compared with $6.1 billion for Egypt and $405 million for South Africa.

Looking ahead, the bank expects elevated crude oil prices and improving production levels to continue supporting reserve accumulation, although seasonal foreign exchange demand could exert further pressure on the naira in the near term.

It expects gross external reserves to remain on an upward trajectory through the end of the year, providing continued support for foreign exchange market stability and strengthening Nigeria’s capacity to absorb external shocks.