•Experts laud CBN for driving rate convergence
SPECULATORS have been thrown into confusion as $1.31 billion in foreign portfolio investment (FPI) inflows and aggressive reforms by the Central Bank of Nigeria (CBN) continued to narrow the gap between the official and parallel (black) foreign exchange markets. This shift marked a major turnaround in Nigeria’s forex dynamics and signals growing confidence in the country’s economic direction.
Speaking with the Nigerian Tribune, Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., described the development as evidence of the Central Bank’s progress in stabilising the exchange rate and fostering a more unified and efficient forex system. “It shows that the various efforts and policies of the CBN to stabilise the exchange rate are working,” he stated.
According to a recent report by Coronation Merchant Bank, total foreign exchange inflows surged to $1.31 billion last week, compared to $750 million the previous week. Foreign portfolio investors dominated with a 62.50 percent share for the ninth consecutive week, highlighting sustained interest in Nigerian fixed income assets. Non-bank corporates contributed 14.08 per cent, exporters 12.76 per cent, the CBN 9.86 percent, while other corporates and individual provided 0.33 and 0.34 percent, respectively.
As a result of the inflows, the naira closed at N1,532.54/$ on Monday, maintaining near stability from the previous Friday’s close of N1,532.34/$ in the official market. At the same time, Nigeria’s gross external reserves rose by $500 million or 1.3 percent week-on-week to reach $37.93 billion as of July 18, 2025, up from $37.43 billion a week earlier. This increase is attributed to improved oil receipts, inflows from multilateral sources, and reduced direct interventions by the CBN.
The naira also showed modest gains at the NAFEM window, appreciating by N2.12 or 0.14 per cent week-on-week. It traded as strong as N1,518.89 during the week, supported by robust inflows from exporters, non-bank corporates, and continued FPI participation.
Highlighting the progress, Murtala Sagagi, a member of the Monetary Policy Committee (MPC), stated in his personal submission. “The value of the naira has been relatively stable even though it is still considered undervalued. It is projected that the naira would appreciate to N1,450 per US dollar by the end of 2025.”
In a milestone development, the exchange rate gap between the official and parallel markets has narrowed to just N1. On Friday, the naira traded at N1,535/$ in the parallel market, while the official market posted N1,536/$, according to CBN data. This represents a dramatic convergence from the end of the Buhari administration, when the official rate stood at N464.51/$ and the black-market rate averaged N762/$ — a gap of N297.49 that previously encouraged arbitrage and speculation.
This convergence aligned with President Bola Ahmed Tinubu’s campaign promise to unify Nigeria’s multiple exchange rates. “I will eliminate multiple FX exchange rate regimes when I become the president in 2023,” Tinubu had said at a business forum before the election. True to his word, on June 20, 2023—just six days into his tenure—the official and parallel market rates converged at N756/$.
Nigeria’s foreign exchange reserves have continued to rise, climbing to $37.78 billion from $37.6 billion, a 0.37 per cent increase, driven by oil export earnings, diaspora remittances, and investor confidence underpinned by fiscal and monetary reforms.
Tilewa Adebajo, CEO of The CFG Advisory, praised the CBN’s adoption of a transparent FX management system using a Bloomberg bid-offer platform. “The spread between official and black market rates has declined from over 50 per cent in 2022 to under 5 per cent in 2025,” he told the Nigerian Tribune. “The FX market and economy cannot grow if there is speculation, distortion, and manipulation. Transparent markets eliminate arbitrage, not enable it. FX trading should support the economy, not serve as a profit center.”
He further challenged prevailing assumptions about dollar scarcity: “The CBN now contributes only 2 percent of the FX market turnover. So, where are the supply and demand imbalances people talk about?” Despite the improvements, Adebajo believes the naira still has room to strengthen and should ideally trade below N1,000/$.
Echoing this optimism, renowned economist and CEO of Financial Derivatives Company, Bismarck Rewane, noted during an appearance on Channels Television that the naira’s gains are rooted in sound policy. “The currency is strengthening because of the discipline in the monetary policy framework and the transparent foreign exchange market,” Rewane said. “Without these, Nigeria’s inflation figures would be alarming. But today, both domestic and international stakeholders agree the economy is leaping its way out of crisis.”
As reforms continue to take shape, analysts agree that sustained progress will depend on policy consistency, market transparency, and a resilient investment climate that encourages long-term capital inflows.
