Naira slips to N1,340/$ as stronger U.S. Dollar widens gap between official, parallel markets

The naira depreciated slightly at the official market on Wednesday, closing at N1,340 per dollar compared to N1,337/$ recorded a day earlier, according to data published by the Central Bank of Nigeria (CBN).

Trading figures from the Nigerian Foreign Exchange Market (NFEM) showed that the local currency fluctuated between N1,328/$ and N1,340/$ during intraday activity, with a simple average rate of N1,337.17/$. Although the daily movement was marginal, analysts noted moderate volatility within the session.

The weakness at the official window was mirrored in the parallel market, where the naira fell sharply to N1,400/$ from N1,382.5/$ on Tuesday.

The N60 spread between the two segments underscores persistent fragmentation in the foreign exchange market, despite ongoing reforms aimed at rate unification and improved transparency.

Currency traders linked Wednesday’s pressure on the naira to renewed strength in the U.S. dollar following the release of minutes from the Federal Reserve’s latest policy meeting.

The minutes suggested that U.S. policymakers are not in a hurry to cut interest rates and that some members remain open to additional tightening if inflation remains elevated. The release pushed U.S. Treasury yields higher and strengthened the dollar against major currencies.

In early Asian trading, the euro remained below $1.18 while the dollar consolidated gains against both the euro and the Japanese yen. Analysts said the global dollar rebound typically exerts pressure on emerging and frontier market currencies, including the naira.

“The Fed minutes signal that rate cuts may be delayed longer than markets had anticipated. That has supported dollar demand globally and weighed on risk-sensitive currencies,” said Bismarck Rewane, Managing Director of Financial Derivatives Company.

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He added that even small shifts in global liquidity conditions can trigger portfolio adjustments affecting Nigeria’s FX inflows.

The widening gap between the official and parallel markets reflects ongoing demand-supply imbalances, according to analysts.

Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said the divergence suggests that liquidity in the official market remains insufficient to fully absorb demand.

“The spread indicates that speculative demand and unmet FX needs are still finding expression in the parallel market. Sustained supply through autonomous inflows and improved confidence will be key to narrowing the gap,” Yusuf said.

In recent months, the CBN has intensified reforms aimed at unifying exchange rate windows, clearing foreign exchange backlogs and improving price discovery.

The apex bank has also reported improved foreign exchange inflows, contributing to reserve accretion and relative stability compared to the sharp volatility experienced during earlier reform phases.

Analysts, however, warn that external headwinds—particularly U.S. monetary policy uncertainty—could continue to influence short-term movements in the naira.

“For now, the naira remains highly sensitive to global dollar liquidity conditions. If the Fed maintains a hawkish stance, emerging market currencies could remain under pressure,” Rewane said.

Market participants will be watching upcoming U.S. inflation data and further signals from the Federal Reserve for clues about the direction of global interest rates and their potential impact on Nigeria’s foreign exchange market.