Naira records gain against US dollar amid rising FX inflows

The naira gained ground on the parallel market Friday, closing at N1,590 to the dollar — a firm improvement from N1,610 the previous day.

This marks the strongest performance of the local currency on the street market since April 8, when it traded at N1,565/$, following weeks of hovering near the N1,600 mark.

Conversely, at the official Nigerian Foreign Exchange Market (NFEM), the naira saw a slight dip, settling at N1,554/$ compared to N1,545/$ on Thursday. Despite the official rate’s mild decline, the differential between official and parallel market rates narrowed sharply to N41, down from N70 a day earlier — a sign analysts interpret as a move toward a more stabilized market.

Analysts attributed the naira’s rebound to stronger foreign exchange inflows and a renewed sense of investor confidence.

Fresh data from Cordros Securities shows that FX inflows surged significantly in May, reaching $5.96 billion — a 62 percent rise from April’s $3.67 billion.

“According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) surged by 62.0 per cent m/m to $5.96 billion in May, April: $3.67 billion,” Cordros noted in its market commentary.

“The improvement was primarily due to a substantial increase in inflows from both local, 83.2 per cent of total inflows and foreign 16.8 percent of total inflows sources.
“In the near term, we anticipate that foreign exchange inflows will continue to improve, supported by growing market confidence. However, the lingering global trade uncertainties remain a downside risk to robust inflows from foreign counterparts, potentially constraining growth in overall FX liquidity,” Cordros stated.