Midweek official market trading opened with the Naira settling at N1,843/£1, continuing a multi-week trend where the British pound has failed to reclaim its N1,850/£ support level since July 20.
Recent tick data from the Central Bank of Nigeria (CBN) showed tight price action, with the exchange rate moving within a narrow corridor between N1,830/£ and N1,845/£. This narrow range indicates short-term market clarity despite persistent structural challenges.
While the official window shows more orderly price discovery, the market continues to face risks from parallel market spreads and structural illiquidity. These challenges typically intensify during import cycles, UK tuition payment periods, and corporate inventory build-ups.
CBN Interventions and Market Liquidity
To stabilize the local currency, the CBN has implemented monetary tightening measures to manage liquidity and curb inflation. These reforms have altered how the official market and lenders price foreign currency pairs following rate convergence.
Recent interventions by the apex bank have aimed to boost dollar inflows and clear FX payment backlogs. However, domestic foreign exchange market turnover recently crashed to an 11-week low of $185 million as activity thinned.
Additionally, the CBN injected N5.21 trillion into the banking system in a single week, just ahead of a N700 billion National Treasury Bills auction. Despite these efforts, ongoing demand for trade, refined imports, and external debt servicing continues to pressure the medium-term outlook.
Global Factors and Inflation Outlook
Internationally, the British pound hovered near $1.35 against the US dollar as traders prepared for key macroeconomic data. Market participants are awaiting the July US Consumer Price Index report and the upcoming United Kingdom Gross Domestic Product release.
The GBP/USD pair remained above its 20-day Exponential Moving Average of $1.3437, supported by a bearish trend line at $1.3465. The 14-day Relative Strength Index stood at approximately 60, indicating steady upward momentum without entering overbought territory.
Global currency markets also faced pressure from geopolitical tensions in the Middle East. An advisor to Iran's top leader, Mojtaba Khamenei, stated that the Strait of Hormuz would remain closed unless the US met Iran's demands, while Houthi forces targeted Saudi-linked vessels in the Red Sea, keeping oil prices elevated.
