Market News
Unmet FX demand triggers informal market activity, dollar trades at N1,395 - THE SUN
•Arbitrage, round-tripping may resume, experts warn
By Chinwendu Obienyi
Nigeria’s foreign exchange (FX) market is showing renewed segmentation as unmet demand in the official window continues to drive activity in the informal segment, Daily Sun learnt on Monday. In the parallel market, the naira was quoted at N1,395/$1 for buying and N1,400/$1 for selling at the resumption of business, reflecting sustained demand pressure outside the official FX channel.
The pricing indicates continued willingness among market participants to pay a premium for dollar liquidity where official access is constrained or delayed.
span class="Apple-converted-space"> The naira gained ground in the official market last week, closing at N1,362.21/$, an improvement of N11.04 from N1,373.25/$ last week. Mid-week, the naira briefly rallied to N1,357.26/$, its strongest level in nearly a month, owing to offshore supply from OMO auction which outweighed domestic demand.
However, in the parallel market, the naira weakened to N1,398/$ from N1,375/$, a depreciation of N23. This pushed the parallel market premium to N35.79 (2.63 per cent), up sharply from just N1.75 (0.13 per cent) in the previous week, a divergence worth monitoring despite healthy official market liquidity.
Although, external reserves strengthened, crossing the $50 billion mark, market structure indicators suggest persistent frictions.
BDC operators who spoke to Daily Sun whilst pointing to unmet FX demand in the official market, added that the timing and allocation mismatches in dollar supply could lead to speculative positioning by participants anticipating future volatility.
Yusuf Danladi, an operator at Ajah, explained that the resulting spread between official and informal pricing underscores continued segmentation in Nigeria’s FX ecosystem. “While reforms and inflows have supported stability in the formal window, transmission to end-users remains uneven”, he said.
According to him, the widening reliance on the parallel market, even at modest premiums, signals underlying stress points that could persist if FX access inefficiencies are not addressed.
Despite these pressures, the broader outlook remains cautiously stable, supported by improved reserves, sustained inflows, and relatively firm official market conditions.
Cordros Research in its market update, said, “We expect the naira to remain broadly stable in the near term, underpinned by resilient portfolio and remittance inflows, strong market confidence, Nigeria’s favourable external position, and sustained carry trade appeal. However, if the US-Iran conflict escalates further and triggers portfolio outflows, we expect the CBN to deploy measured FX interventions to contain excessive exchange rate volatility”.
Sharing the same sentiment, Coronation Merchant Bank, noted that the Naira is expected to trade within a relatively stable range, supported by sustained foreign currency inflows, improving market liquidity, and broader participation following the recent revision of the FX manual.
“The updated framework is expected to enhance market flexibility, ease previous restrictions, and further strengthen confidence in the foreign exchange market”, the firm said.
However, the informal market remains a key barometer of latent demand pressures in the system.
