Pressure in Nigeria’s foreign exchange market intensified in the third trading week of January 2026 as the naira weakened sharply in the parallel market, widening the gap with the official exchange rate to its highest level in nearly a year.
Data from Nairametrics Research and the Central Bank of Nigeria (CBN) show that the naira depreciated to about N1,490 per dollar in Abuja’s parallel market, compared with N1,477 recorded earlier in the month. In contrast, the official market posted a mild gain, with the currency closing at N1,417.95 per dollar on Friday, up from N1,424.5 a week earlier.
The divergent movements pushed the spread between the two markets to roughly N73, the widest since February 2025, underscoring persistent distortions in FX pricing despite marginal improvements in official market conditions.
The slight appreciation at the official window coincided with a modest increase in Nigeria’s external reserves. According to the CBN, foreign exchange reserves rose to $45.8 billion by the end of the week, from $45.6 billion previously, supported by inflows from oil exports and portfolio investments. While this build-up has strengthened external buffers, it has not been sufficient to ease demand pressures across the FX market.
Strong demand for foreign currency, coupled with limited supply, continues to weigh on the naira, particularly in the parallel segment where individuals and businesses unable to access official FX turn to bureau de change operators. This dynamic has kept the parallel market under sustained pressure, even as the official rate shows signs of short-term stability.
The widening gap mirrors trends observed at the close of 2025, when the parallel market ended the year at about N1,470 per dollar, compared with N1,429 at the official window. That divergence marked the largest spread since February 2025, a period that also saw heightened volatility, including episodes where the official rate briefly traded weaker than the parallel market.
Market analysts closely monitor the spread between the official and parallel rates as a barometer of FX market stress. A widening differential often signals rising arbitrage opportunities and unmet demand at official windows, conditions that historically prompt policy responses from the CBN, including direct FX interventions and measures to curb speculation.
Although Nigeria’s foreign reserves have remained above the $45 billion mark since the start of January 2026, providing some cushion for market stability, the persistent divergence between exchange rate windows suggests that demand-side pressures remain a key challenge. How the CBN balances reserve management, liquidity provision, and broader macroeconomic conditions will continue to shape currency expectations in the weeks ahead.