Nigeria’s foreign-exchange landscape saw subtle shifts mid-week, with the British Pound edging closer to key support levels across both official and unofficial trading windows. Market activity remained steady but reflected a cautious mood among traders watching demand trends and evolving macroeconomic conditions.
At the official market, Central Bank of Nigeria (CBN) figures showed the pound closing at N1,931, after trading between N1,924 and N1,933 during Wednesday’s session. Activity at the parallel market moved slightly higher, hovering around N1,950/£, buoyed by retail demand and the liquidity dynamics that typically intensify toward the end of the month.
Analysts note that seasonal drivers—particularly holiday-related demand for foreign currency—are expected to exert slight upward pressure on the pair. As a result, exchange rates could drift toward N1,950–N1,975/£ as Nigerians settle payments for imports, travel, and overseas tuition. Forecasts for the remainder of the month project average levels in the N1,949–N2,021/£ range, with the possibility of spot rates surpassing N2,000/£ if naira pressures persist due to weak FX inflows or a surge in import demand.
Some projection models even point to a scenario in which a stronger pound could effectively push the exchange rate toward N2,300/£, though baseline outlooks remain more moderate, anticipating a gradual strengthening of the pound underpinned by the UK’s economic trajectory.
Nigeria’s Export Momentum Provides a Counterweight
Despite near-term headwinds for the naira, Nigeria’s long-term currency fundamentals have been buoyed by substantial export growth in 2024. Total exports, expressed in naira, climbed to N77.4 trillion, more than doubling the previous year’s N36 trillion. This expansion highlights not only the resiliency of the economy but also Nigeria’s improving competitiveness in regional and global markets.
Dollar-denominated receipts slipped slightly—from $60.65 billion in 2023 to $57.9 billion—but the composition of exports paints a more encouraging picture. Non-oil sectors are driving much of the momentum, according to the International Trade Centre (ITC).
Cocoa exports delivered one of the most striking performances, soaring from $759 million to $2.6 billion within a year. Exports of ores and residues also rose significantly, reaching $824.4 million, underscoring the country’s efforts to diversify beyond crude oil. These gains point to a more balanced economic outlook that could help stabilize the naira over the long term, even if short-term volatility remains.
Sterling Strengthened by UK Budget and Global Monetary Signals
Internationally, the British Pound has been supported by recent fiscal and monetary developments in the UK and the United States. Sterling currently trades near 1.333 against the U.S. dollar, notching a 1.46% gain over the past month and delivering its strongest weekly performance in more than three months.
A weaker U.S. dollar has contributed to this upward momentum, though upcoming policy decisions from the Bank of England (BoE) and the U.S. Federal Reserve (Fed) could introduce fresh volatility. Markets anticipate a 25-basis-point BoE cut, while the Fed is expected to take a more aggressive easing path.
The UK’s fiscal policy also plays a role. Chancellor Rachel Reeves’ November budget introduced £26 billion in tax measures aimed at closing fiscal gaps and maintaining prudent borrowing levels. This has been broadly supportive of the pound, although ongoing political debate surrounding the measures may influence sentiment.
Economic indicators present a mixed backdrop. The UK’s services PMI was revised upward to 51.3, signaling modest expansion, but declining employment levels underscore underlying fragilities. Meanwhile, inflation has dropped to its lowest point since January 2021, reinforcing expectations for BoE rate adjustments.
The global environment continues to shape currency flows. Although risk-off sentiment typically favors the U.S. dollar, markets have not seen a significant flight to safety, allowing sterling to maintain its bullish tone. Traders are watching resistance at $1.3370–1.3400, viewing dips as potential buying opportunities unless support at $1.3265 gives way.