In a significant turn of events, the Nigerian naira has strengthened in the black market for the first time since 2015, just a week after the Central Bank of Nigeria (CBN) implemented measures to harmonize rates around the Investors’ and Exporters’ (I&E) window. This unexpected development indicates that end-users are now able to acquire dollars at a discounted rate in the alternative foreign exchange (FX) market, a rare occurrence in its history.
On Monday, the I&E window closed at N770.38/$, experiencing a rapid decline of over nine percent against the greenback in a single day. Although the trading session had initially opened at N705.5/$, the local currency experienced a sharp decline, briefly touching N799/$ before showing some improvement and closing at N770.38/$. This session proved to be one of the most volatile in recent times, with the naira reaching its lowest intraday rate at N461/$.
Earlier predictions suggested that the unpegging of the local currency could lead to a more volatile FX rate. While the dollar has breached the psychological barrier of N750/$ and is nearing the N800/$ mark, it still sells at an average of N750/$ in the street market. Traders in Lagos quoted buying and selling prices at N745/$ and N755/$ respectively, resulting in an average rate of N750/$—approximately 2.6 percent lower than the official market rate on the first trading day of the week. Despite the naira gaining N13.77 against the dollar, the closing rate of N756/$ remained slightly higher than the prevailing rates in the black market.
The elimination of arbitrage opportunities and increased activity in the official window may be affecting trading volumes in the alternative market. Reports indicate that street traders are facing a liquidity shortage as the supply of dollars dries up. This development may prompt exporters to favor the official window for selling their remitted FX, while companies and individuals holding foreign currency abroad could be motivated to repatriate their funds through the official channel. Experts suggest that these factors could contribute to a stronger naira over time.
Meanwhile, Bloomberg reported that the Deputy Governor of the CBN, Dr. Kingsley Obiora, clarified that the recent changes do not imply a complete free float of the currency, contrary to what some media platforms have reported. Obiora emphasized that no country adopts a fully free float approach to FX management and cautioned against concluding that the naira has reached its lowest point, as it continues to trade above N750/$ in the official market. He further hinted at upcoming policy changes in the following weeks, implying that the floating of the currency is just the beginning of a series of market reforms.