Naira Stabilizes as Exchange Rate Gap Narrows to Just ₦1 Across Official, Parallel Markets

In a rare development that has sparked cautious optimism across Nigeria’s financial sector, the naira on Wednesday, July 17, 2025, recorded a near-perfect alignment between the official and parallel market exchange rates.

The naira traded at ₦1,536 per dollar in the official market and ₦1,535 per dollar in the parallel market, bringing the exchange rate gap to a narrow margin of just ₦1.

This marks the smallest premium between the two markets in several years.

Financial analysts attribute the development to a mix of increasing foreign exchange inflows, tighter monetary policies, and improved confidence in the Central Bank of Nigeria’s (CBN) foreign exchange management. Data from the CBN indicates that Nigeria’s external reserves have grown steadily, now reaching about $37.78 billion. The rise is largely credited to increased oil export revenues, stronger diaspora remittances, and renewed foreign investment interest in Nigeria’s fixed income and capital markets.

The narrowing of the exchange rate gap comes at a time when the Central Bank has refrained from intervening heavily in the market, instead allowing market forces to play a stronger role in determining the naira’s value.

This shift, which forms part of the CBN’s broader market reform policy, aims to unify Nigeria’s multiple exchange rates and promote transparency in the FX market.

Oil production has also played a significant role. Nigeria has recently exceeded its OPEC oil output quota, leading to higher dollar earnings from crude exports. This, combined with easing inflation—down to 22.22% in June from 22.97% in May—has provided a more stable macroeconomic backdrop that supports the naira’s position.

Traders in both the official and unofficial markets noted a significant drop in speculative demand for dollars, a trend that had in the past fueled volatility. Many believe the current market alignment reflects growing confidence in the naira’s short-term stability.

The development also comes just days ahead of the CBN’s next Monetary Policy Committee (MPC) meeting scheduled for July 21 and 22. Stakeholders are watching closely to see if the committee will adjust key interest rates or introduce new policy measures in light of the improving FX market performance.

Despite the positive signs, economic experts caution that the current stability may still be fragile. Any major shock—such as a decline in global oil prices or disruption in crude production—could quickly reverse the gains. The sustainability of the narrow exchange rate gap will depend on continuous FX inflows, disciplined monetary policy, and ongoing macroeconomic reforms.

Nonetheless, for now, the convergence of exchange rates offers a rare moment of relief for businesses and individuals who have long contended with sharp differences between official and black-market rates. It also signals progress in the federal government’s ongoing efforts to strengthen the economy and restore investor confidence.