Nigeria’s local currency, the naira, came under renewed pressure this week as it slid to ₦1,612 per dollar at the official foreign exchange window on Wednesday, May 7, 2025.
This marks a slight decline from ₦1,609 recorded the previous day, reflecting continued volatility in the country’s FX market despite ongoing interventions by the Central Bank of Nigeria (CBN).
According to data from the CBN, the naira traded within a wide range during intraday transactions, peaking at ₦1,615/$1 and dipping to a low of ₦1,605.01/$1. Compared to Tuesday’s range of ₦1,603/$1 to ₦1,609.5/$1, the widening spread highlights growing market uncertainty and liquidity strain.
FX market participants cite irregular inflows and persistent dollar shortages as major challenges. While the CBN has remained active in the market to stabilize rates, dealers suggest that the underlying issue remains weak supply fundamentals, which market interventions alone cannot fully address.
Black Market Tensions Mount as Gap Narrows
In the unofficial parallel market, the naira also took a hit, trading at ₦1,625 per dollar on May 7, up from ₦1,615 the previous day. Earlier in the week, the rate stood at ₦1,605/$1, reflecting a ₦20 drop over 48 hours. Despite the decline, the spread between the official and parallel market rates has narrowed to around ₦13, a development that analysts interpret as a sign of mounting speculative activity and the inefficiency of accessing forex through legal channels.
The narrowing premium is often considered a warning signal that investors and individuals are losing faith in the official market’s ability to meet genuine demand. It also suggests that black market activity may remain strong unless deeper reforms boost FX liquidity.
Analysts Warn Structural Gaps Still Persist
Market analysts continue to stress that the naira’s ongoing challenges are less about pricing mechanisms and more about supply-side constraints. Adetokunbo Bamidele, a forex trader and financial analyst at a Lagos-based investment firm, argues that while the CBN has made strides in improving transparency and market participation, the real challenge lies in the inconsistent flow of forex from sources like oil exports, remittances, and foreign direct investment.
“Unless Nigeria finds ways to boost its dollar inflows sustainably, currency depreciation will remain a threat,” he said.
Dr. Kemi Taiwo, an economist with Axion Financial Services, also emphasized the need for a cohesive macroeconomic strategy. “The FX market alone cannot carry the weight of currency stabilization. What we need is coordinated fiscal and monetary policy action to restore investor confidence and reduce reliance on the parallel market,” she noted.
Foreign Reserves Inch Up—But Not Enough?
In a slightly positive development, Nigeria’s external reserves rose to $38.10 billion as of May 6, up from $37.93 billion recorded at the end of April. The modest increase is believed to have come from oil-related receipts and possibly new FX borrowing by the government. However, financial experts warn that unless reserves are significantly boosted, Nigeria may struggle to shield the naira against further speculative attacks.
As global economic headwinds and local fiscal challenges continue to mount, the outlook for the naira remains fragile. While short-term interventions may offer temporary relief, sustainable solutions depend on deeper reforms, stronger exports, and policies attracting capital inflows.
