Market News

The naira on Wednesday appreciated further in the parallel market, narrowing the exchange rate gap between the official and unofficial markets to just N7, as ongoing reforms continue to support currency stability.

The naira closed at N1,537 per dollar in the parallel market, commonly referred to as the black market, while it settled at N1,530.25 in the official foreign exchange (FX) market.

In the black market, this represents a gain of N8 or 0.5% from the N1,545 it traded at on Monday before the one-day holiday declared by the Federal Government to mourn former President Muhammadu Buhari.

At the Nigerian Foreign Exchange Market (NFEM), however, the naira weakened slightly, depreciating by N11.37, as the dollar was quoted at N1,530.25 on Wednesday, down 0.7% from Monday’s N1,518.88, according to data from the Central Bank of Nigeria (CBN).

On Monday, the naira had surged to a four-month high of N1,518.88 per dollar at the official market, supported by improved FX liquidity and a moderation in demand for the greenback across trading windows. The last time the naira traded at a stronger level was on March 14, 2025, when it closed at N1,517.93 per dollar.

By the end of trading on Monday, the local currency had appreciated by 0.74%, gaining N11.38 from Friday’s closing rate of N1,530.26 at the NFEM, based on CBN data.

Capital inflows remain vital for supporting Nigeria’s balance of payments and the naira. Recent figures from the CBN revealed that Nigeria attracted $5.03 billion in Foreign Portfolio Investments (FPIs) in the first quarter of 2025, according to the H1 2025 macroeconomic update report by FSDH Merchant Bank.

According to the report, the naira had lost just 0.2% of its value year-to-date as of June 27, 2025, closing at N1,539. The local currency had peaked at N1,630 on April 9 but has since appreciated. The CBN has continued to implement reforms aimed at boosting market confidence and improving transparency.

“We note that major risks to economic growth and FX stability include potential financial outflows, as well as crude oil price and output levels falling below the Federal Government’s budget benchmarks. We maintain our earlier forecast that the naira will settle around N1,595 in 2025,” analysts at FSDH stated.

In its Article IV report on Nigeria, the International Monetary Fund (IMF) stressed the importance of maintaining a tight monetary policy stance and ensuring a positive real interest rate to help bring down inflation and support FX market stability. The IMF emphasised that the exchange rate should be allowed to play a shock-absorbing role during external shocks, while foreign exchange interventions (FXIs) should be targeted at managing excessive volatility, in line with the Integrated Policy Framework (IPF).

The report also noted that given the shallow nature of Nigeria’s FX market, the high pass-through effect of the exchange rate on inflation, and the country’s growing reliance on short-term foreign inflows, external rollover needs must be managed with agility.