On Wednesday, the Nigerian Naira depreciated, to ₦1,585 per dollar in the parallel market, down from ₦1,565 the previous day.
This decline mirrored trends in the Nigerian Foreign Exchange Market (NFEM), where the Naira weakened to ₦1,546 per dollar from ₦1,537, marking a ₦9 drop, according to data from the Central Bank of Nigeria (CBN).
As a result, the gap between the parallel market and NFEM widened to ₦39 per dollar, up from ₦37 the day prior, signaling persistent pressure on Nigeria’s currency.
Economic Drivers Behind the Naira’s Decline
The Naira’s depreciation stems from a mix of limited foreign exchange inflows and surging demand for the dollar. Nigeria’s crude oil production, a key source of forex earnings, has faltered, dipping to 1.47 million barrels per day (bpd) in February from 1.54 million bpd in January, well below the Organization of the Petroleum Exporting Countries (OPEC) quota. This shortfall has constrained dollar supply, exacerbating the currency’s woes.
Meanwhile, increased outflows, driven by contractual payments and government releases, have intensified demand for foreign currency. Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), highlighted on Monday that these payments have significantly fueled dollar demand, putting additional strain on the Naira.
Last week, the Naira’s weakening trend persisted. At the official market, it closed at ₦1,517.24 per dollar, a 1.66% drop from ₦1,492.49 the previous week. The parallel market followed suit, with the currency easing to an average of ₦1,520 per dollar, reflecting heightened dollar demand. This comes despite recent gains attributed to CBN policies, which had briefly stabilized the Naira around the ₦1,500 mark in both markets.
However, these monetary interventions appear insufficient to counter the current economic headwinds, as the Naira struggles to maintain its footing.
Mixed Perspectives: Chatham House Weighs In
Interestingly, Chatham House, a prominent think tank, recently suggested that the Naira’s depreciation has yielded some economic benefits. According to their report, the weaker currency has bolstered Nigeria’s balance of payments, pushing it into a surplus, and encouraging capital inflows back into the country.
While this offers a silver lining, the immediate reality for Nigerians remains challenging, with the Naira’s declining value driving up costs in an import-dependent economy.
Broader Currency Weakness and Global Context
The Naira’s struggles extend beyond the dollar. On the black market, it depreciated against other major currencies this week. The British Pound rose to ₦2,020 on Wednesday from ₦2,010 on Monday, while the Euro climbed to ₦1,690, a ₦30 loss from ₦1,660 earlier in the week. The Canadian dollar, however, held steady at ₦1,150.
The global dollar index, which measures the U.S. dollar against six major currencies, edged up slightly to 103.70, a 0.09% increase from 103.61 on Wednesday. This followed a 0.46% plunge to 103.2 on Tuesday, the lowest since October 16. The U.S. markets have been experiencing massive selloffs, where trillions of dollars liquidated in days. This spooked U.S. investors, causing them to shift to safer assets, yet the Naira has failed to capitalize on this, instead depreciating further.
Despite a fleeting period of stability earlier in 2025, the Naira’s latest decline underscores the fragility of Nigeria’s forex market. Weak oil output, rising dollar demand, and limited policy impact have left the currency vulnerable, even as global dollar dynamics shift.
While Chatham House points to long-term trade gains, the immediate pressures evident in the gradual weakening of the Naira’s against other currencies, paint a sobering picture.
