Naira Slips After Two Weeks of Gains Despite Rising Reserves

After two weeks of steady appreciation, the naira gave back recent gains on Wednesday as demand for dollars outpaced supply in the official foreign-exchange window. 

The Central Bank of Nigeria (CBN) data and market reports show the official spot rate closed at about ₦1,494/$1, up from ₦1,484/$1 the previous trading day, with the currency touching an intraday high near ₦1,498/$1 before settling.

What happened

Traders and analysts say the reversal was driven by a fresh shortage of FX in the official market: businesses and banks stepped up dollar purchases for international payments and imports while available dollars despite steady inflows were insufficient to meet that burst of demand. 

The result was a short, sharp depreciation in the official window that erased some of the two-week gains the naira had put together.

The pullback in the naira came against a background that is, in many ways, more positive. Nigeria’s gross external reserves have been rising in recent weeks and depending on the data series are hovering close to the $42 billion mark. Updated figures published this week put reserves at roughly $41.9 billion, a level market participants say gives the CBN more room to intervene if necessary.

Why the two signals can coexist

At first glance a rising reserve stockpile and a weakening intraday exchange rate look contradictory. They are not. 

Reserves are a stock, a snapshot of the foreign-exchange buffer while the exchange rate is a flow-driven price that reacts instantly to market sentiment and transactions. 

A stronger reserve position gives the central bank more firepower to smooth volatility over time, but it does not automatically eliminate day-to-day mismatches between dollar supply and demand.

What traders and economists are saying

Some market participants have started to treat the recent period as the emergence of a new formal benchmark for the official window. “The current rate at about ₦1,480/$1 should be the benchmark to judge naira and dollar performance,” said Janet Ogochukwu, a senior banker and economist, who told reporters that the CBN should aim to preserve predictability and guard against sudden volatility. 

Others caution that headline reserve numbers can mask near-term pressures. When dollar demand spikes for instance, for dividend payments, import bills, or corporate foreign obligations even healthy reserves can be drawn down quickly unless the central bank injects additional liquidity into the market.

CBN action and prior interventions

The CBN has already intervened this month to smooth liquidity. Market reports show the bank sold about $29.1 million to authorised dealers in a recent operation, a move that temporarily supported the naira and helped drive the early September rally below the ₦1,500 mark. 

Analysts stress that such interventions help calm markets but are not a permanent substitute for steady inflows and structural reforms that expand FX supply. 

Oil and global drivers

External factors are also at work. Crude-price swings and global inventory data can influence dollar inflows to Nigeria by affecting oil receipts and investor sentiment.

This week the American Petroleum Institute reported a crude-stock draw of about 3.4 million barrels, a signal that briefly supported oil prices but came with mixed messages from refined-product stocks gasoline down while distillates rose which left markets cautious. 

Meanwhile, reports of strikes at Russian refineries have added a geopolitical risk premium to energy markets, though the net effect on Nigeria’s receipts is indirect and timing-dependent. 

What to watch next

• CBN interventions: Traders will watch whether the apex bank steps up dollar sales to steady the naira or lets market forces play out. Recent interventions have shown the CBN is willing to act, but persistence matters. 

• Daily liquidity flows: Corporate dollar demand for import and external payments often dictates short-term moves. A cluster of big payments can trigger sharp intraday swings
  
• Oil receipts and global oil news: Any sustained upswing in oil prices or stronger-than-expected export receipts would help FX inflows and reduce liquidity stress. API and EIA weekly reports, plus geopolitical developments, will therefore be monitored closely.