The naira remained relatively stable around N1,350 to the dollar on Wednesday, despite strong returns on US financial assets and continued pressure on foreign portfolio investment flows.
Data from the Central Bank of Nigeria (CBN) showed that the local currency closed at N1,349/$ at the Nigerian Foreign Exchange Market (NFEM), maintaining its recent stability amid tight monetary conditions in the United States.
The development comes after the US Federal Reserve retained its benchmark interest rate, signalling that borrowing costs could remain elevated for longer.
US Treasury yields hovering around 5% continue to make dollar-denominated investments attractive to international investors, potentially limiting capital flows into emerging markets such as Nigeria.
The relatively high returns available in the US have constrained foreign portfolio investment inflows into Nigeria’s open market operations (OMO) instruments and domestic bonds, adding pressure to the country’s foreign exchange supply.
However, Nigeria’s attractive domestic yields have continued to provide an incentive for investors to retain naira-denominated assets rather than convert their holdings into dollars.
Higher crude oil earnings have also provided some support to the foreign exchange market, with Nigerian crude prices reportedly trading around $115 per barrel.
The CBN has equally intervened in the foreign exchange market by supplying liquidity to authorised dealer banks to address outstanding demand and improve market stability.
Analysts expect the naira to trade within the N1,340–N1,370/$ range in the near term, supported by central bank interventions and foreign exchange inflows from crude oil exports.
Attention is now shifting to the next Monetary Policy Committee meeting, where any decision to reduce domestic interest rates could narrow Nigeria’s positive interest-rate differential with the United States.
Meanwhile, movements in the US dollar are expected to remain influenced by inflation data and the Federal Reserve’s future monetary policy decisions.
