Markets remained largely stable following the naira’s modest appreciation earlier in October. Foreign exchange dealers noted that liquidity in the official trading windows has improved slightly in recent weeks, keeping the Nigerian Foreign Exchange Market (NFEM) rates within the upper ₦1,400 range — still below the typical figures seen in the parallel market.
Analysts attribute the naira’s relative stability to recent policy adjustments by the Central Bank of Nigeria (CBN) and a gradual easing of inflation. In September, the CBN lowered its benchmark interest rate, signaling a shift toward a more accommodative monetary policy after a long period of tightening. This move has helped reduce volatility in the foreign exchange market. However, persistent supply shortages and ongoing demand from importers and retail customers continue to sustain the premium between official and parallel market rates.
Why the Gap Exists Between Official and Parallel Market Rates
Official rates — such as those published under the NFEM or NAFEX frameworks — are based on electronic interbank trading data and dealer submissions, producing a daily volume-weighted average rate. The CBN and FMDQ oversee and verify these fixings to ensure accuracy and transparency.
Conversely, the parallel market operates outside the formal banking system and is primarily driven by cash-based transactions among individuals and small businesses. When liquidity in the official market is limited or banks restrict access to foreign exchange for private customers, parallel rates tend to rise independently. As of October 22, parallel market quotes were approximately ₦15–₦30 higher than the official NFEM rate.
Implications for Nigerians and Businesses
Importers and companies accessing the official foreign exchange windows will transact close to the NFEM rate of around ₦1,468 per U.S. dollar. Meanwhile, individuals engaging in street-level cash transactions will encounter higher rates, typically ranging between ₦1,480 and ₦1,495.
Market participants and businesses are advised to keep a close watch on the CBN’s liquidity interventions as well as intraday activities within the FMDQ and NAFEX markets, which provide early indicators of short-term rate movements and overall market sentiment.
