The Nigerian naira resumed its downward trajectory against the U.S. dollar this week, weakening in both official and unofficial foreign exchange markets after a brief period of gains. Data from the Central Bank of Nigeria (CBN) showed the currency closed at N1,532.54 per dollar on Monday, a marginal 20 kobo dip from Friday’s rate of N1,532.34. While the official market saw only slight depreciation, the parallel market—often used by businesses and individuals facing limited access to official channels—recorded a steeper decline, with the naira trading at N1,540 per dollar, down from N1,350 the previous week.
The reversal comes just days after the naira had edged higher across markets, underscoring the currency’s persistent volatility. Analysts attribute frequent fluctuations to Nigeria’s dollar shortages, which are exacerbated by lower oil revenues and uneven central bank interventions. The country, Africa’s largest economy, relies heavily on crude exports for foreign exchange earnings, leaving its currency vulnerable to global oil price shifts and domestic production challenges.
The latest exchange rate movements coincide with Nigeria’s statistical agency revising its GDP calculation methodology, raising the economy’s nominal value to N372.8 trillion ($265 billion) for 2024. While such rebasing—a routine process to update the base year for measuring economic output—aims to reflect structural changes in sectors like telecommunications and finance, it does not inherently signal growth or directly impact currency stability.
Economists note that the widening gap between official and parallel market rates often fuels inflation, as import costs for goods priced in dollars rise. Nigeria’s annual inflation hit 33.95% in May, driven partly by currency pressures and reforms like the removal of fuel subsidies. The central bank has raised interest rates sharply in recent months to stabilize the naira, but concerns persist over liquidity constraints and speculative trading in unofficial markets.
The naira’s ongoing struggles highlight broader economic headwinds faced by policymakers balancing forex market reforms with efforts to curb inflation and stimulate growth. While the CBN has cleared billions in overdue forex obligations to boost investor confidence, sustainable recovery will likely hinge on increased oil output and measures to attract foreign capital into non-oil sectors.
