The naira weakened by N9.68 against the dollar at the Nigerian Foreign Exchange Market on Thursday, with the Central Bank of Nigeria selling $800 million by early afternoon to support the currency. The CBN quoted the dollar at N1,344.40 on Thursday, compared with N1,334.72 on Wednesday, representing a 0.72 percent depreciation, according to data published by the Central Bank. In the parallel market, the naira weakened by 0.29 percent to N1,377 per dollar on Friday from N1,373 the previous day. The gap between the official and parallel market rates narrowed to N33, or 2.46 percent, from N43, or 3.23 percent previously.
The scale of the Central Bank's intervention has sparked debate about whether foreign portfolio investors are withdrawing funds from Nigeria. The CBN sold $150 million on Wednesday and $300 million on Thursday before increasing its support. It then sold $300 million at N1,345 and a further $500 million at N1,344, bringing reported dollar sales to $800 million by 1:30 p.m. However, analysts cautioned against drawing firm conclusions about capital flight based on two days of trading.
Ayodeji Ebo, chief executive officer of MDU Capital, said it would be premature to conclude that foreign portfolio investors were exiting based on two days of CBN dollar sales. The demand could be driven by large, one-off transactions or import payments, while slightly lower fixed-income yields might be encouraging some portfolio managers to take profits after benefiting from attractive interest income and naira appreciation. "Some profit-taking does not necessarily signal a broad investor exit," Ebo said, noting that Nigeria's external reserves remained reassuring.
Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said a longer period of data was required to determine whether the CBN's dollar sales reflected a sustained shift in market conditions. "We need data over a relatively longer period before making a call," Olubunmi said. Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said the naira's movement over two days was insufficient to establish a trend of capital-flow reversals. He argued that several weeks of trading data would be needed to determine whether portfolio flows were reversing, adding that Nigeria's economic fundamentals remained intact, supported by external reserves and exchange-rate stability.
Yusuf said he did not see a significant risk of capital flight in the absence of a major threat of policy reversals, while noting that concerns around fuel subsidy policy had featured in the debate. The latest developments underscore the importance of distinguishing temporary demand pressures from a sustained reversal of foreign investment flows as the CBN intervenes to support stability in the foreign exchange market.