The naira traded at approximately N1,400 per dollar in the parallel market on Monday, as sustained demand for foreign currency persisted outside the official foreign exchange window. This development highlights ongoing fragmentation in Nigeria's FX market.
Official Market Gains
In contrast, the naira strengthened in the official market last week, closing at N1,362.21 per dollar. This improvement was driven by enhanced dollar inflows and stronger liquidity conditions. The local currency appreciated by N11.04 from the previous week's closing rate of N1,373.25 per dollar, and even reached N1,357.26 per dollar, its best performance in nearly a month.
Market analysts attributed the official market rally to increased offshore inflows linked to Open Market Operations (OMO) auctions, which helped offset domestic demand pressures.
Parallel Market Weakness
While the official market strengthened, the parallel market moved in the opposite direction. The naira weakened from N1,375 per dollar to N1,398 per dollar over the same period, representing a depreciation of N23. At the start of trading on Monday, the black market rate stood at N1,395 per dollar for buying and N1,400 per dollar for selling.
Consequently, the gap between official and parallel market rates widened significantly. The premium rose to N35.79, or 2.63 percent, compared to just N1.75, or 0.13 percent, a week earlier.
Unmet Demand Drives Informal Market
Despite Nigeria's external reserves surpassing the $50 billion mark, structural challenges remain. Bureau de Change (BDC) operators noted that many legitimate dollar requests are still not being fully met in the official market. Delays in allocation and mismatches in supply timing often encourage market participants to seek alternatives in the parallel market.
A BDC operator in Ajah, Yusuf Danladi, said the widening gap reflects ongoing segmentation within the country's FX system. He stated: "While reforms and inflows have supported stability in the formal window, transmission to end-users remains uneven."
He warned that the growing reliance on the parallel market, even when premiums remain relatively modest, points to underlying pressures that could persist unless access to foreign currency becomes more efficient.
Outlook and CBN Intervention
Market observers maintain a cautiously optimistic outlook for the naira, citing stronger external reserves, sustained inflows, and relatively healthy liquidity in the official market. In related news, the Central Bank of Nigeria (CBN) released $81 million to Bureau De Change operators, continuing efforts to ease pressure on the foreign exchange market. This followed an earlier $18 million injection aimed at supporting the naira as volatility resurfaced in the official market. Economists said the latest allocation should help improve market confidence and provide short-term stability for the currency.
