In a modest turnaround, the Nigerian naira appreciated in the parallel market, also known as the black market, trading at ₦1,560 per US dollar on Tuesday, July 9, 2025, representing a gain of ₦5 from the previous day’s rate of ₦1,565.
Conversely, the naira experienced a slight depreciation in the official Nigerian Foreign Exchange Market (NFEM), closing at ₦1,530.5/$, down from ₦1,529.5/$ recorded on Monday. The divergence in the two markets reduced the rate gap between the official and parallel markets from ₦35.5 to ₦29.5, a notable drop suggesting some temporary relief in FX market volatility.
Market Movements and Trader Sentiment
Currency traders in Abuja and Lagos attributed the appreciation in the parallel market to a slight improvement in the supply of dollars and lower demand from end-users, especially importers and travelers. Several traders said that more people were holding back from buying dollars amid speculations of a potential naira rebound, influenced by upcoming fiscal policies and improved oil revenue outlook.
One trader at Wuse Zone 4, Abuja, told Newsmen:
“Since Monday, the demand for dollars has dropped a little. People are watching to see where the rate will go. Some are expecting that the naira may even go below ₦1,550 in the coming days if the Central Bank releases more dollars.”
The development marks one of the few times in recent weeks that the naira has shown upward movement in the parallel market, where it has largely struggled due to insufficient FX supply and persistent demand pressure.
Dynamics at the Official Window
Despite the parallel market improvement, the slight depreciation at the official window reflects ongoing challenges in achieving convergence between the two markets. The official rate, published by the FMDQ Exchange, shows that the Naira closed at ₦1,530.5/$, compared to ₦1,529.5/$ on Monday—suggesting a marginal weakening of ₦1.
Total turnover in the Investors’ and Exporters’ (I&E) window was relatively flat, according to data from the Central Bank of Nigeria (CBN), with dollar inflows remaining sluggish and supply from autonomous sources still below required levels to meet national demand.
Narrowing the Gap: A Glimmer of Hope?
The narrowing of the exchange rate gap to ₦29.5 suggests a potential softening of speculative activities in the informal market. Financial analysts say this could be due to increased monitoring and enforcement by monetary authorities, or cautious optimism among market participants regarding economic reforms.
Dr. Kunle Adewale, an economist at the University of Lagos, explained:
“The appreciation in the black market is encouraging, but we have to look at the fundamentals. What is driving it? Is it improved dollar supply or simply reduced demand? If it’s the former, then we may be entering a more stable period. But if it’s the latter, it could be temporary.”
Policy Implications and CBN’s Role
The Central Bank of Nigeria has come under pressure in recent months to stabilize the exchange rate and reduce the volatility that has persisted since the naira was floated in mid-2023. While the CBN has continued to intervene in the FX market, critics argue that these interventions have been insufficient or inconsistent.
There are also calls for the government to address structural issues such as:
Inadequate dollar supply from oil exports and remittances
Multiple FX windows causing arbitrage opportunities
Over-reliance on the parallel market by importers due to bottlenecks in the official market
Need for fiscal alignment to support monetary measures
Earlier this year, the CBN introduced several policies aimed at attracting foreign inflows, including offering higher interest rates on naira-denominated instruments and relaxing rules around diaspora remittances. However, the full impact of those reforms is still being evaluated.
Outlook
While the appreciation of the naira to ₦1,560/$ in the parallel market is a welcome development, analysts caution against premature celebration. Sustained stability will depend on consistent FX inflows, credible monetary policy, and investor confidence in Nigeria’s macroeconomic direction.
For now, Nigerians watching the exchange rate remain cautiously optimistic, hoping for further naira gains and a reduction in inflationary pressure, especially on imported goods.
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