Naira Strengthens to N1,390/$ in Black Market as FX Gap Narrows to N35

Naira Strengthens to N1,390/$ in Black Market as FX Gap Narrows to N35

The Nigerian naira strengthened sharply to N1,390 per dollar in the parallel market on Monday, further narrowing the gap between the black market and the official foreign exchange window by 2.5 percent.

Data from street traders showed the naira appreciated by N30, or 2.16 percent, from N1,420 quoted on Friday to N1,390 on Monday morning in the parallel market.

The latest movement has reduced the exchange rate spread to N35, down from N92 recorded last Wednesday, signaling continued convergence between the two segments of Nigeria’s foreign exchange market.

FX Convergence Gains Momentum

The narrowing spread reflects improved liquidity conditions and renewed market confidence following policy adjustments by the Central Bank of Nigeria (CBN).

On Friday, the gap between the official and parallel markets had already tightened to N65, as Bureau De Change operators anticipated fresh dollar supply from commercial banks. This followed the CBN’s reopening of the retail foreign exchange window to BDCs, a move widely viewed as supportive of market stability.

The convergence trend suggests that speculative pressure in the parallel market may be easing, particularly as access to formal FX channels improves.

Official Market Shows Mild Weakness

While the naira gained strength in the parallel market, it depreciated slightly at the official window for the second time last week.

At the Nigerian Foreign Exchange Market (NFEM), the currency slipped by N1.76 to close at N1,355.42 per dollar on Friday, compared to N1,353.66 recorded on Thursday. The marginal decline represented a 0.13 percent loss, according to data released by the CBN.

Despite the slight weakness at the official window, analysts note that the broader trend indicates improving alignment between the two rates.

What the Narrowing FX Gap Means

A shrinking gap between the official and parallel market rates is generally seen as positive for investor confidence and price stability. Wide spreads often encourage arbitrage opportunities, speculative activity, and pricing distortions across the economy.

Improved convergence could reduce pressure on import costs and help moderate inflation expectations, particularly if sustained over several trading sessions.

Market participants will be closely watching whether fresh dollar supply to BDCs and continued policy interventions by the central bank maintain the momentum toward exchange rate stability.

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