Naira’s Parallel Market Approaches Official Exchange Rate Amid CBN Reforms
The Nigerian naira has been steadily appreciating in the parallel market, narrowing the gap with the official foreign exchange (FX) rate following a series of reforms implemented by the Central Bank of Nigeria (CBN). On Wednesday, the naira appreciated to N1,585 per dollar, crossing the psychological threshold of N1,600 in the black market. The official exchange rate remained relatively stable, with the dollar closing at N1,499.76, resulting in a narrowing of the exchange rate spread to N85.24 per dollar. In comparison to the beginning of the year, the naira has strengthened by 5%, signaling positive changes in the currency market.
Currency dealers have attributed this improvement in the naira’s value to enhanced dollar supply and a moderation in the demand for foreign currency. This shift can be largely credited to the CBN’s tightening monetary measures and the increased capital flows into the Nigerian economy. CBN Governor Olayemi Cardoso highlighted that the narrowing of exchange rate disparities across various market segments is the result of these bold measures. Additionally, the relatively stable exchange rate has helped attract more capital into the country, reinforcing its potential as an investment destination.
Despite the positive trend, Nigeria’s external reserves have experienced some fluctuations. As of February 4, 2025, reserves stood at $39.55 billion, but this figure had risen to $40.88 billion by November 2024, from $40.06 billion at the end of October 2024. These rising reserves provide a crucial buffer against economic uncertainties and are expected to further stabilize the foreign exchange market. The CBN has made significant strides in managing the country’s foreign exchange flows, and this has helped to improve the exchange rate’s stability.
In line with these developments, the CBN has mandated that Bureau de Change (BDC) operators purchase a maximum of $25,000 per week from authorized dealer banks. These funds, once purchased, must be sold to end-users at a rate no higher than 1% above the buying rate, which aims to maintain a fair exchange rate. Additionally, BDC operators must comply with Anti-Money Laundering (AML) regulations and provide daily returns on their forex purchases and sales. The CBN’s stringent guidelines are designed to ensure transparency and curb misuse of the foreign exchange system.
The central bank’s reforms also extend to the types of transactions for which BDCs can sell foreign exchange, such as Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, and medical expenses. There are caps on the maximum disbursements allowed per transaction, set at $5,000 per quarter. The CBN has stressed that strict compliance with these policies is necessary to maintain order in the market, and violations will lead to sanctions, including the suspension of operating licenses for dealers found in breach of these regulations.
Source: BUSINESS DAY