The Nigerian naira recorded marginal appreciation at both the official and parallel markets by the end of November, according to data from FMDQ and Bureau de Change (BDC) operators.
In the official market, the naira strengthened against the dollar by 0.17%, improving from an opening rate of N1,675.49/$1 at the start of the month to N1,672.69/$1 by month-end.
Similarly, in the parallel market, the naira appreciated by 0.40%, moving from N1,750/$1 at the beginning of November to N1,743/$1 by the end.
The naira’s appreciation in the parallel market extended to other key currencies, gaining 1.76% against the pound to close at N2,230/£1 and 1.88% against the euro, closing at N1,830/€1 by the end of the month.
Key data points
Official market performance
- The naira gained 0.17% against the dollar in the official market, closing at N1,672.69/$1 on November 30, compared to an opening rate of N1,675.49/$1 on November 1.
- The month’s weakest official exchange rate was N1,690.37/$1 on November 18, while the strongest was N1,644.86/$1 on November 28.
Parallel market performance
- In the parallel market, the naira appreciated by 0.40% from N1,750/$1 at the start of November to N1,743/$1 at month-end.
- The currency reached its strongest point at N1,725/$1 on November 12 and its weakest at N1,755/$1 on November 22 and 26.
Market Trends
- The naira saw sustained depreciation early in November before recovering in the final week of the month. Increased trading volumes were recorded, peaking at $1,403.76 million on November 8, up from $244.96 million the previous day.
- Unlike the official market, the naira appreciated in the first two weeks of November but faced depreciation towards the month’s end.
- Despite fluctuations, the parallel market remained relatively stable, with rates ranging between N1,725/$1 and N1,755/$1.
Key factors at play
- The federal government’s exemption of import duties and VAT on specific food items from July 31 to December 31, 2024, led to increased importation, raising dollar demand.
- Nigeria’s crude oil traded at an average of $78.62 per barrel during the month, reflecting weak global energy demand, particularly from China.
- In September, the Central Bank of Nigeria (CBN) sold $20,000 to eligible BDC operators at N1,580/$1, aiming to ease pressure on the naira. Such periodic interventions may continue to stabilize exchange rates.
- The government’s directive allowing marketers to purchase refined fuel locally from the Dangote Refinery could reduce import dependency, potentially easing dollar demand.
- Nigeria’s foreign reserves grew by 1.10% in November, from N39.78 billion to N40.22 billion, supporting the CBN’s capacity for market interventions.
What to expect
- With oil prices below $80 per barrel, Nigeria’s revenue is under pressure, compounding inflationary challenges and negatively impacting naira stability.
- Inflationary trends, forex supply constraints, and broader economic policies will continue to play pivotal roles in shaping the naira’s trajectory in the coming months.
- While the naira’s November performance provided a glimmer of recovery, its long-term stability remains tied to structural economic reforms and the broader global economic climate.
- Increased importation for the holiday season may heighten dollar demand, potentially exerting renewed pressure on the naira. Nairametrics Research projects that the naira may test new lows, ranging between N1,700/$1 and N1,750/$1 in the official market, and up to N1,800/$1 in the parallel market.
