Nigeria’s local currency, the naira, further weakened against the United States dollar at the official foreign exchange (FX) market on Friday, closing at ₦1,602.18 per dollar, according to data published on the Central Bank of Nigeria (CBN) website. This marks a ₦5.49 loss from the ₦1,596.69 recorded before the mid-week Workers’ Day holiday on Wednesday, May 1.
The 0.34% depreciation capped off a turbulent trading week that saw the naira fluctuate narrowly across three sessions, with closing rates at ₦1,599.95 on Monday, ₦1,599.71 on Tuesday, and ₦1,596.69 on Wednesday. Though the losses may appear marginal in numerical terms, the psychological effect of the naira once again breaching the ₦1,600 threshold underscores persistent volatility in Nigeria’s FX market.
Currency analysts attribute the decline to renewed dollar demand pressure, particularly from foreign investors repatriating dividends, importers seeking FX to meet obligations, and the continued speculative hoarding of the greenback in anticipation of further naira depreciation. Additionally, FX supply remains constrained, despite recent CBN measures aimed at improving liquidity and ensuring market stability.
The apex bank had earlier intervened through policy adjustments and dollar injections into the market, but analysts warn that sustained exchange rate stability will require deeper structural reforms beyond periodic intervention.
Speaking to The Punch, Lagos-based financial economist Dr. Ngozi Adeyemi noted, “This is not just about supply and demand. Investors are watching Nigeria’s inflation, monetary policy direction, and broader economic reforms. Until there’s greater confidence, the naira will remain under pressure.”
The naira’s latest slide raises questions about the effectiveness of recent reforms introduced under the leadership of CBN Governor Olayemi Cardoso. In March, the bank unified segments of the FX market, introduced new disclosure requirements for banks, and revoked licenses of several non-compliant Bureau de Change (BDC) operators in a bid to sanitise the parallel market.
While those actions briefly boosted market confidence and strengthened the naira in April, the current weakening suggests that structural challenges—such as insufficient FX reserves, weak non-oil exports, and reliance on imports—continue to undermine the local currency.
As of April 30, the CBN’s external reserves stood at approximately $33.4 billion, a figure analysts say is just barely adequate to cover about six months of imports. Market players argue that unless oil revenues increase or Nigeria attracts significant foreign portfolio inflows, the naira’s long-term recovery will remain fragile.
Meanwhile, the parallel market (black market) exchange rate reportedly hovered around ₦1,680/$ on Friday, creating a wider gap of nearly ₦80 between official and informal rates. The growing disparity is likely to incentivise arbitrage and further complicate the CBN’s monetary control efforts.
Traders in Lagos and Abuja told The Punch that dollar supply from BDCs remains thin, and most buyers now rely on peer-to-peer (P2P) platforms and crypto-facilitated exchanges to access foreign currency.
Looking ahead, financial experts forecast continued volatility unless Nigeria’s fiscal and monetary authorities take coordinated steps to boost investor confidence, reduce dependence on imports, and improve dollar supply.
“Without increasing non-oil exports and attracting long-term capital flows, the naira will continue to face headwinds, especially during dividend repatriation seasons or global dollar demand spikes,” said investment strategist Kunle Ojo.
The CBN is expected to meet later this month for its Monetary Policy Committee (MPC) session, where analysts anticipate further tightening of interest rates to tame inflation and support the currency.