The naira traded at ₦1,825 to the British pound on Monday, slipping beyond the ₦1,800 threshold as demand for foreign currency builds ahead of Nigeria’s festive travel period.
Data from the Central Bank of Nigeria (CBN), cited by Nairametrics, showed the local currency settling at the weaker level. The exchange rate has fluctuated considerably this year, moving above ₦1,900 per pound at earlier points before trading within the ₦1,750–₦1,850 range during October.
The latest movement comes as households and businesses prepare for increased spending on overseas travel, education and other foreign-currency expenses.
Festive travel and school fees add to FX demand
Demand for pounds typically rises when Nigerians travel abroad for holidays, visit relatives or shop overseas during Christmas and New Year. The United Kingdom is a major destination for many travellers.
Families paying tuition and accommodation costs for children studying in Britain also require foreign exchange, adding to demand during periods when universities receive new students.
When demand for foreign currency rises faster than available supply, buyers may have to pay more naira to obtain pounds, putting additional pressure on the exchange rate.
Interest rates and market demand also matter
The report also points to monetary policy and demand from large institutional buyers as factors influencing foreign-exchange movements.
Changes in interest rates can affect the relative appeal of naira-denominated investments compared with assets held in other currencies. Meanwhile, demand in different segments of the foreign-exchange market can cause rates to diverge.
However, the report does not provide figures quantifying how much each factor contributed to Monday’s exchange rate.
Oil revenue and reserves offer potential support
Nigeria’s foreign-exchange outlook could also be influenced by crude oil earnings and the country’s external reserves.
Higher oil prices can increase foreign-currency receipts for the government, while stronger reserve levels can give the CBN greater capacity to supply dollars and other currencies to the market or intervene during periods of pressure.
The source report puts Nigeria’s gross external reserves at approximately $55 billion, describing the level as a multi-year high. Such reserves can provide a buffer against foreign-exchange shocks, although they do not guarantee that the naira will strengthen.
Impact of the weaker naira on Nigerians
A higher pound-to-naira exchange rate increases the local-currency cost of expenses denominated in sterling. Nigerians travelling to the UK, paying overseas school fees or sending money to relatives may therefore need more naira to cover the same costs.
Importers and businesses that pay suppliers in pounds could also face higher expenses, potentially affecting prices for consumers.
The direction of the exchange rate will depend on foreign-currency supply, demand from individuals and businesses, monetary policy, and developments in global markets. The reported move to ₦1,825 per pound signals renewed pressure on the naira as the year-end period approaches.
Source: Nairametrics