Market News

The naira depreciated sharply against the dollar across foreign exchange markets, losing N34.48 in a single trading session at the official window, as external reserves declined and demand pressures resurfaced.

Data from the Central Bank of Nigeria (CBN) showed that the naira weakened by 2.48 percent, with the dollar quoted at N1,388.38 on Monday. This represents a loss of N34.48 compared to N1,353.90 recorded on Wednesday, the last trading day before the public holiday, underscoring renewed pressure in the market.

At the parallel market, also known as the black market, the local currency similarly depreciated, shedding N15 or 1.06 percent to close at N1,415 per dollar on Monday, down from N1,400 recorded on Wednesday last week.

As a result, the gap between the official and parallel market rates narrowed significantly to N27 on Monday from N47 recorded at the close of trading last week, reflecting shifting dynamics between both segments of the market.

External reserves have now declined for six consecutive sessions, reflecting sustained outflows linked to heightened geopolitical tensions in the Middle East.

A market report by Coronation Merchant Bank noted that in the preceding week, the naira had appreciated against the US dollar by 0.90 percent week-on-week, gaining N12.33 to close at N1,353.90 per dollar at the official window on Wednesday. In the parallel market, the currency also strengthened by 0.71 percent to close at N1,405.00 per dollar.

Despite the appreciation recorded in both markets during that period, the premium between the official and parallel market rates widened to N51.10 per dollar from N48.77 per dollar in the previous week, highlighting persistent demand pressures within the informal foreign exchange segment. 

Analysts attributed the earlier gains to a combination of rising global oil prices, sustained interventions by the CBN, and improved autonomous foreign exchange inflows. According to FMDA market data, the naira had shown resilience across both market segments, supported by these factors.

Looking ahead, analysts at Coronation Merchant Bank expressed cautious optimism about the near-term outlook for the currency. “We expect the naira to trade within a relatively stable range in the near term, supported by sustained foreign portfolio investment inflows and improved participation by exporters in the FX market,” the report stated.

Recent reforms introduced by the CBN continue to shape market structure and investor sentiment. In November 2024, Olayemi Cardoso, governor of the CBN and his team rolled out the Electronic Foreign Exchange Matching System (EFEMS), powered by Bloomberg BMatch. The platform introduced mandatory order submission, enhanced real-time regulatory visibility, and strengthened price discovery mechanisms in the FX market.

In addition, the apex bank launched the Nigerian Foreign Exchange Code, aimed at promoting transparency, ethical conduct, and standardised practices among market participants.

A major milestone in the reform process was the clearance of a longstanding backlog of foreign exchange obligations across key sectors such as aviation and manufacturing. The move, described by Cardoso as resolving a “once crippling” constraint, has helped restore market confidence and improve Nigeria’s credibility among investors and businesses.

The cumulative impact of these measures has been a reduction in market opacity and speculative activities, as well as improved discipline in FX trading. Speaking in December 2025, Cardoso noted that the naira had begun trading within a narrower and more stable range, with the gap between the official and parallel markets shrinking to under 2 percent from levels that previously exceeded 60 percent.

He reaffirmed the CBN’s commitment to maintaining a flexible exchange-rate framework, stating that the policy allows the naira to function as a shock absorber while limiting excessive volatility in the market.

Despite these structural improvements, Monday’s sharp depreciation highlights the continued sensitivity of the currency to demand pressures and external factors, reinforcing the need for sustained inflows and policy consistency to stabilise the foreign exchange market.