In the past week, the naira reversed some of the gains it had made in recent times as it depreciated against the United States dollar at both the parallel and official markets.

At the close of trading in the past week, the naira weakened by 1.66 per cent week-on-week, closing at 1,517.24/$ from 1,492.49/$ the previous week. At the parallel market, a similar trend was observed with the naira easing to an average of 1,520/dollar, reflecting a gradual uptick in demand for the greenback.

According to Bureau De Change operators, the naira lost as much as N70 to close at 1,570/dollar at the end of the week.

Naira had closed February 2025 with an 8.5 per cent gain month-on-month on the parallel market to settle at 1,490/$, while it closed at 1,500/$ on the official market, indicating a 1.7 per cent m/m decline, and analysts had a positive outlook for the currency in March barring shocks.

AIICO Capital Limited, in an investor note, fingered increased demand for dollars by foreign portfolio investors and local corporates for the depreciation.

“The naira depreciated this week due to tight dollar liquidity and increased demand from foreign portfolio investors and local corporates,” AIICO Capital Limited said, adding that offshore demand remained strong, pushing rates higher despite interventions from the Central Bank of Nigeria.

CardinalStone, in its daily market report on Friday, lined up with the notion that pressure on the naira at the foreign exchange market increased “arising from profit-taking actions by foreign portfolio investors and local corporates, offsetting support from CBN’s intervention at the interbank market.”

The analysts at Cowry Assets Management Limited pointed out that the CBN’s continued weekly interventions in the FX market to support the naira will be crucial as it will dictate currency movements. However, there is a belief that the CBN, with a reserve worth $38.35bn as of Thursday, has sufficient resources to provide a buffer for the naira.

“While the short-term outlook suggests a moderate market performance, an improved supply of dollars could provide some relief for the local currency,” the experts said.

This projection lines up with that of Afrinvest in its Monthly Market Report, where it noted that “in March, we anticipate the naira will maintain its positive performance across FX segments, supported by the CBN’s continued USD supply to BDCs and DMBs, provided there are no adverse market shocks.”

Before now, experts had highlighted some of the challenges threatening the naira’s stability, including a mounting debt burden, sustained decline in foreign reserves, and high inflation rates. They claim that these factors threaten to undermine the potential gains of ongoing foreign exchange reforms.