Naira Gains Against Dollar, Pound, Euro as Official-Parallel Gap Narrows to 2.88%

The naira strengthened against the US dollar, British pound and euro as improved foreign exchange supply supported the official market. The gap between the official and parallel-market dollar rates narrowed to 2.88% from 3.11%, according to Central Bank of Nigeria data.

The local currency appreciated by 0.07% against the dollar at the Nigerian Foreign Exchange Market on Thursday. It closed at N1,331.6139 per dollar, compared with N1,332.5893 in the previous trading session.

Official market rates

Market Forces Africa data showed the exchange rate moved between N1,327 and N1,333.50 per dollar during intraday trading. The marginal gain came as foreign portfolio investors, non-bank corporates, exporters and other participants added to dollar supply.

The naira also gained 0.07% against the British pound to close at N1,764.26 per pound. Against the euro, it rose 0.07% to settle at N1,490.48.

Interbank foreign exchange turnover fell by about 59% to $201.562 million from $490.855 million in the previous session. The number of deals at the interbank window dropped to 128 from 179 on Wednesday.

Parallel market and spread

In the parallel market, the dollar declined by 0.29% to N1,370. The pound fell by 0.55% to N1,810, while the euro dropped by 0.33% to N1,505.

The movements narrowed the official-parallel dollar gap to 2.88%, down from 3.11%. The smaller spread points to slight convergence between the two markets, although their rates remain different.

Outlook for the naira

Market analysts expect the naira to stay relatively stable at the official window in the near term, with the official-parallel gap staying below 3%. AIICO Capital Limited said crude oil prices above $100 per barrel could help sustain foreign exchange inflows and support the local currency. Higher oil prices can lift Nigeria's foreign exchange position through potential export earnings, but actual gains depend on production levels, sales and the volume of proceeds repatriated into the domestic market.

At the NFEM, the dollar was down 7.25% against the local currency year-to-date. Sustained appreciation will depend on steady dollar inflows, foreign investor participation and demand for foreign currency from businesses and other market participants.

In early October, the naira held relatively steady. Market reports for Friday, October 9, placed the currency at about N1,329.34 per dollar at the NFEM, while the parallel market quoted around N1,385.

For Nigerian businesses and consumers, the narrower official-parallel gap offers some relief from exchange-rate swings. But the sharp fall in interbank turnover shows that liquidity remains uneven, and steady dollar inflows will matter for the naira's next move.