CBN Governor, Olayemi Cardoso
The naira strengthened by 1.58 per cent at the official market this week to close at N1,359.32/$, indicating signs of improving foreign exchange (FX) liquidity and stabilising market sentiment, even as broader financial markets reflected a mix of cautious positioning and selective optimism.
At the parallel market, the local currency also recorded a modest gain of 0.36 per cent to close around N1,373/$, suggesting a gradual narrowing of market arbitrage.
The currency’s performance comes amid sustained efforts by the Central Bank of Nigeria (CBN) to boost liquidity alongside increased participation from foreign investors seeking to take advantage of improving yields and relatively stable macroeconomic conditions.
In the global commodities market, crude oil prices continued to trend upward in early Asian trading, as geopolitical tensions and uncertainty surrounding the durability of the Iran ceasefire kept supply concerns in focus.
Research Analyst at Cowry Asset Management Limited, Charles Abuedu, said the naira’s recent appreciation may be sustained in the short term, driven by improved FX liquidity and relatively stable investor sentiment.
He, however, warned that structural pressures, including sustained demand for foreign exchange and external vulnerabilities, could limit the pace and extent of further appreciation.
He said oil prices are likely to remain elevated and volatile in the near term as ongoing geopolitical risks and uncertainties surrounding the Iran ceasefire continue to influence global supply expectations, leaving crude benchmarks highly reactive.
Meanwhile, activity in the domestic fixed income market reflected a more cautious tone, with the Nigerian secondary bond market closing the week on a soft note as demand weakened across most maturities.
Investor appetite remained subdued, leading to a 10 basis points increase in average yields to 15.89 per cent, underscoring liquidity constraints and risk aversion in the local debt market.
In contrast, the Nigerian sovereign Eurobond market recorded a modest rebound, supported by renewed demand from offshore investors.
Average yields declined by 33 basis points to 7.12 per cent, signalling improved sentiment toward Nigeria’s external debt instruments and a gradual return of risk appetite in the international market.
Analysts expect the domestic bond market to remain under pressure in the near term, as cautious sentiment and tight liquidity conditions continue to weigh on demand, sustaining upward pressure on yields.
