Naira 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.

According to the Afrinvest Monthly Market Report, the foreign reserve dipped by 3.2 per cent month-on-month. As of Thursday, it stood at $38.46bn.

“This decline can be linked to CBN’s efforts to stabilise the naira, particularly through the resumption of payments for the verified portion of the outstanding $7.0bn foreign exchange backlog,” the analysts said.

They went on to project 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.”

In the foreign exchange market, the naira had exhibited mild strength against the American greenback and hovered around the N1,500 band at both segments of the market in recent times.

Highlighting the factors driving the market, Cowry Asset Research said in the past week, the Nigerian oil benchmark, Bonny Light crude, traded in a weak region at the international oil market, shedding $2.36, or 3.2%, week-on-week to close at $75.88 per barrel as of Thursday.

“This decline was primarily driven by weakened global demand, which weighed on crude prices across the board. The sustained pressure on oil prices resulted in lower dollar inflows into Nigeria’s economy, directly impacting the nation’s foreign exchange reserves. As a result, forex reserves declined by $240m, or 0.61 per cent week-on-week, reflecting weaker oil earnings and highlighting the persistent foreign exchange liquidity challenges facing the country.

“At the official window, the local currency appreciated marginally by 93 kobo against the greenback, closing at N1,500.15 per dollar. Meanwhile, at the parallel market, the naira gained N5 to settle at an average of N1,490 per dollar as demand pressure eased slightly.”

On the outlook for the week, the analysts said, “In the coming week, we anticipate a continued battle for stability in the forex market as the apex bank intensifies efforts to defend the naira. With the CBN expected to take more decisive steps to support the local currency, including tightening liquidity and enhancing forex supply mechanisms, the naira could gain further ground against the dollar in the coming week.”

Experts have in the past 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.