The Naira showed signs of recovery on the official NAFEM window, closing September 2024 at N1,541/$, reflecting a 2.77 per cent appreciation from N1,585/$ at the start of the month.
This marks a slight improvement compared to its weaker performance in July and August. However, the parallel market painted a bleaker picture, with the Naira slumping to N1,700/$—its weakest level since February 2024.
Financial analysts view the disparity between the official and parallel markets as a sign of deep-rooted liquidity issues in Nigeria’s foreign exchange market.
“While the official rate is showing stability due to CBN interventions, the gap with the parallel market suggests a misalignment in demand and supply,” says Adewale Olufemi, a forex market analyst at Capital Consult.
He notes that without a broader strategy to address foreign exchange shortages, the parallel market could remain under pressure despite the central bank’s efforts.
The Central Bank of Nigeria (CBN) had a busy September, announcing an FX sale of $20,000 to Bureau De Change (BDCs) operators at N1,590/$, providing a small profit margin.
This move followed a sharp decline in forex turnover earlier in the month, which dropped to just over $100 million before rebounding to $334.05 million by September 26.
The CBN’s aggressive monetary tightening also raised the monetary policy rate (MPR) for the fifth consecutive time and implemented stricter cash reserve ratios (CRR) for both commercial and merchant banks.
Analysts have mixed reactions to these interventions. While the increase in foreign reserves by almost 5 per cent to $38.058 billion by month-end is seen as a positive sign, concerns linger about sustainability.
“The CBN’s moves may provide short-term relief, but they don’t fully address the structural imbalances in Nigeria’s forex market.
The widening gap between official and parallel market rates signals underlying pressure that could escalate if liquidity isn’t restored,” warns Kemi Onabanjo, a currency strategist at Global Insight.