…holiday season triggers increased forex demand
The naira continued its downward slide this week, ending trading at ₦1,454 per US dollar, driven largely by seasonal demand pressures and limited dollar inflows. The holiday period typically records increased foreign-exchange demand for travel, imports, and remittances, placing additional strain on Nigeria’s already tight FX supply conditions.
Market operators noted elevated activity from manufacturers and retailers re-stocking for end-of-year sales, while individuals preparing for holiday travel contributed to additional demand at both official and parallel segments.
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Persistent liquidity challenges in the fx market
Despite efforts by monetary authorities to stabilize the market, FX liquidity remains thin. Analysts cite weak foreign-investment inflows, declining oil receipts, and ongoing backlog-clearance obligations as key factors limiting supply. Banks and authorized dealers have struggled to meet rising forex requests, pushing more buyers toward alternative channels where rates remain volatile.
The Central Bank’s recent interventions have provided some short-term cushioning, but structural constraints — including dependence on imports and limited export diversification — continue to exert pressure on the naira’s stability.
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Impact on businesses and consumer prices
The continued depreciation is weighing heavily on Nigerian businesses. Import-dependent SMEs are experiencing rising costs of raw materials, machinery, and finished goods, forcing many to adjust prices or reduce inventory. Manufacturers face increased production costs, while service-sector players struggle with elevated expenses for software licenses, digital tools, and international subscriptions billed in dollars.
Consumers are also feeling the impact as food, electronics, household items, and travel bookings record fresh price increases. The inflationary ripple effect is expected to intensify into early 2026 unless supply improves significantly.
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Outlook and possible interventions
Analysts expect short-term volatility to persist through December. However, improved oil output, expected diaspora remittances, and potential FX inflows from ongoing government reforms may offer mild support. The coming weeks will be crucial in determining whether the naira can stabilize or will face renewed downward pressure as demand peaks.
