Naira Weakens at Official Market as Exchange Rate Gap Narrows

The Nigerian naira lost ground against the US dollar in the official market, halting its recent run of gains due to a slight uptick in demand for foreign exchange from businesses and other participants.

In contrast, the naira appreciated in the parallel market, leading to a sharp contraction in the exchange rate gap between the official and unofficial markets.

Foreign exchange inflows from international investors who participated in the OMO auction supported liquidity levels in the currency market. The Central Bank of Nigeria (CBN) did not intervene during the week, citing the absence of significant market pressure. According to CBN data, the exchange rate declined to N1528.56 per dollar from N1525.82 the previous day.

Trading in the FX market occurred within an intraday range of N1526 to N1530 per dollar, with the average transaction closing at N1528.49.

Meanwhile, in the parallel market, the naira strengthened by 131 basis points to close at N1,530 per dollar, bringing the rate difference between the two markets to just N3 by the close of Friday’s trading session.

Analysts continue to project short-term stability for the naira, underpinned by improved foreign exchange liquidity from both local and foreign sources, coupled with subdued demand pressures. However, Nigeria’s gross foreign exchange reserves declined for the seventh consecutive week, falling by $138.30 million week-on-week to $37.18 billion.

In other markets, gold prices edged up to around $3,330 per ounce on Friday, poised for a weekly gain. Investor concerns about the US fiscal deficit and ongoing tariff uncertainties lifted demand for the safe-haven asset.

On Thursday, the US House approved President Donald Trump’s extensive tax and spending package, projected to add over $3 trillion to the national deficit over the next decade.

Trump also announced plans to begin issuing formal notifications to trading partners outlining tariff rates on exports to the US, marking a shift from earlier commitments to negotiate bilateral agreements.

Despite this, gold's gains were capped by strong US labor market data, which showed that employers added 147,000 jobs in June—exceeding expectations—while the unemployment rate fell to 4.1%, bolstering the case for the Federal Reserve to maintain steady interest rates.

For the week, gold is on track to post a gain of over 1%, snapping two consecutive weeks of losses.