MARKET NEWS

By : Helen Oji

The naira strengthened against the United States dollar in August, with the average exchange rate appreciating by 1.46 per cent month-on-month to N1,353.41/$, as improved foreign exchange liquidity and stronger dollar inflows eased pressure on the domestic currency.

Market data showed that the average spot exchange rate fell by N20.02 from N1,373.43/$ recorded in July, marking the second consecutive month of improvement for the naira.

The performance reflected improved conditions in the official foreign exchange market, where inflows into the Nigerian Foreign Exchange Market (NFEM) rose by 19 per cent month-on-month and 54 per cent year-on-year to $5.2 billion in August.

The inflows represented the highest level since October 2025 and provided additional dollar supply amid sustained demand for foreign currency.

Market operators attributed the improvement to stronger foreign portfolio investment, increased exporter receipts, greater participation by local corporates and Central Bank of Nigeria (CBN) interventions.

The stronger liquidity was also reflected in market turnover. NFEM turnover rose to about $14.45 billion in August from $12.69 billion in July, representing a 13.8 per cent increase. Average daily turnover also increased to $760.43 million from $551.77 million.

However, the naira’s performance during the month was not one-directional. The currency traded between N1,335.50/$ and N1,365.10/$, giving a range of N29.60.

The August trading band was wider than the N22.50 range recorded in July, when the naira traded between N1,361.00/$ and N1,383.50/$. On a simple range-width basis, the August band was N7.10, or 31.56 per cent, wider than July’s.

The wider band indicates that the currency continued to experience two-way movements despite the improvement in the monthly average rate. It also suggests that the appreciation should not be interpreted as an elimination of volatility or underlying dollar-demand pressures.

Analysts said improved FX liquidity was the major factor supporting the naira’s appreciation, citing stronger inflows from foreign investors, exporters and domestic corporates, alongside CBN interventions and improved confidence in the NFEM framework.

They, however, cautioned against interpreting the recent gains as a permanent shift in the currency’s trajectory, noting that the sustainability of the appreciation would depend on continued FX inflows and adequate dollar supply to meet underlying demand.

Centrum Finance Company Limited linked the improvement in August to higher foreign exchange inflows and stronger market activity, but noted that businesses, importers and other market participants continued to generate underlying dollar demand.

The official market also benefited from an improvement in Nigeria’s external position, as foreign exchange reserves continued to rise during the month, providing additional support for external payments and confidence in the currency.

For businesses, a more stable exchange rate could reduce uncertainty around the cost of imported inputs, foreign obligations and other dollar-denominated transactions. Companies that rely heavily on imported raw materials, machinery and other inputs could also benefit from lower naira costs associated with dollar purchases.

For investors, improved FX liquidity could make it easier to enter and exit the Nigerian market and repatriate investment proceeds, with stronger foreign portfolio inflows identified as one of the factors supporting liquidity during the month.