Forex speculation crashes as exchange rate gap closes
On Thursday last week, the naira converged at N1,455 per dollar in both the official foreign exchange (FX) market and the parallel market, effectively closing the exchange rate gap.
Foreign exchange speculation in Nigeria has fallen to an all-time low as the gap between official and parallel market rates continues to narrow sharply. The naira, which has sustained a strong rally across markets in recent months, trades at N1,480 per dollar at the parallel market and N1,470.26 per dollar at the official window as of Monday, October 6, 2025.
Analysts attribute the rebound to a surge in external reserves to $43.05 billion and a marked decline in speculative trading, reflecting renewed investor confidence driven by the Central Bank of Nigeria (CBN)’s ongoing reforms.
“When I assumed office, I made a commitment that by the time I leave the Central Bank, no one would need to know anybody to get their business done. That was particularly important for the foreign exchange market, which had been plagued by inefficiencies and favouritism,” said Olayemi Cardoso, governor of the, while addressing participants at the Bank’s annual lecture series held at the Lagos Business School last week.
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He explained that the journey toward a more transparent and inclusive foreign exchange market has been long and demanding but ultimately rewarding. “In the past, people had to rely on connections to access foreign exchange for travel or business, but that was never a sustainable model. Things are now different. With the support of commercial banks and Chief Executive Officers present here, I must say a big thank you to them for their collaboration. Today, Nigerians can use their naira debit cards when they travel abroad, something that once seemed impossible,” Cardoso stated.
Describing the development as a “major step in the right direction,” he added, “It is transformative, it is not a passing phase, and it is here to stay. Going forward, you can expect to see more initiatives like this that will continue to strengthen confidence and encourage transparency in the foreign exchange market.”
Cardoso’s remarks reflect a broader transformation unfolding in Nigeria’s foreign exchange ecosystem, one defined by reduced speculation, improved liquidity, rising foreign reserves, and stronger market confidence driven by reforms under his leadership.
A country’s currency is an instrument of national pride. For the naira, a turbulent past that saw it lose significant value is gradually giving way to recovery. The ongoing rebound is being driven by stronger demand for the local currency, reduced speculative activity, and rising foreign reserves.
The forex reforms introduced by the CBN under Cardoso’s leadership are now yielding results, curbing speculative trading, narrowing market disparities, and restoring stability.
The apex bank has taken major steps to keep the naira stable in line with its exchange rate objective, boosting foreign exchange supply to retail end users, reducing distortions, and maintaining effective reserves management. Injecting liquidity into the market and enforcing compliance with FX regulations have reduced sharp depreciation pressures and increased foreign investor interest in the domestic economy.
Naira stability has also been supported by inflows from Foreign Portfolio Investors (FPIs), contributions from International Oil Companies (IOCs), and CBN interventions to authorised dealers. Renewed investor confidence has encouraged higher foreign participation, driven by a more transparent FX framework and improving macroeconomic fundamentals.
The CBN governor recently disclosed that Nigeria’s gross external reserves rose to $43.05 billion as of September 11, 2025, compared to $40.51 billion at the end of July 2025, providing an import cover of 8.28 months. “Similarly, the second quarter 2025 current account balance recorded a significant surplus of $5.28 billion compared with $2.85 billion in the first quarter of 2025,” Cardoso said at the 302nd Monetary Policy Committee meeting held in Abuja.
FX Speculations Dip
A Bureaux De Change (BDC) operator in Marina, Lagos, Garuba Sarki, said many dealers have incurred heavy losses as they sold below purchase rates due to the narrowing exchange rate gap.
“I know some BDC operators that sold dollars below the purchasing rate. This is expected to continue in the weeks ahead. Also, the expected dollar inflows to the economy will help strengthen the naira’s position against the dollar,” he said.
Analysts at Commercio Partners attributed the rally and narrowing gap to stronger demand for the naira, reduced speculative trading, and improved reserves.
Ifeanyi Ubah, head of Research at Commercio Partners, expressed optimism that the positive sentiment would be sustained in the near term, supported by increasing external buffers.
“Nigeria’s rising external reserves are reflecting a healthier external position for the country. With reserves strengthening, speculative activity subsiding, and oil earnings supporting inflows, many market watchers believe the naira’s current rally has a stronger foundation compared to previous cycles of volatility,” he said.
However, experts caution that sustaining this momentum will depend on maintaining macroeconomic discipline, boosting crude oil production, and diversifying export earnings.
Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), credited the naira’s ongoing stability to the CBN’s reforms.
He highlighted key policies such as the FX Code, improved investor confidence, and pro-investment initiatives that have effectively curtailed speculation. The FX Code, he said, comprehensively addresses standards for market conduct and operations among financial institutions, entrenching transparency, accountability, and compliance.
Gwadabe noted that all institutions engaged in the FX market are required to submit detailed implementation plans to the CBN on how they intend to achieve full compliance with the Code, approved and signed by their boards.
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At the launch of the FX Code, Cardoso emphasised integrity, fairness, transparency, and efficiency as essential principles for sustaining Nigeria’s economic growth. The Code, built on six core pillars, ethics, governance, execution, information sharing, risk management, and compliance, aligns with international standards while addressing Nigeria’s unique market challenges.
According to Cardoso, “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”
Reforms Reshaping the Market
Beyond the FX Code, the CBN also introduced the Electronic Foreign Exchange Matching System (EFEMS), a tool proven in other economies to improve transparency, eliminate speculative distortions, and provide real-time market information.
Additionally, the apex bank lifted the 2015 restriction on 41 items from accessing FX at the official market to stimulate trade and investment.
These measures underscore the CBN’s commitment to creating an enabling environment for inclusive economic growth. However, Cardoso maintains that achieving lasting macroeconomic stability will require vigilance and proactive monetary management.
Gwadabe added that these policy shifts reflect Cardoso’s determination and creativity in ensuring sustained forex inflows that remain accessible to businesses and end users.
How It Started
When Cardoso assumed office in October 2023, he prioritised rebuilding Nigeria’s economic buffers and strengthening resilience. At the time, the FX market was burdened by over $7 billion in outstanding commitments and multiple exchange rate windows that encouraged arbitrage.
“Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses, ranging from manufacturers to airlines the confidence to plan and invest in the future. To further enhance functionality, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso explained.
Foreign capital inflows remain central to Nigeria’s economic stability. The CBN has since expanded sources of FX inflows, supporting manufacturers, investors, and retail users through improved access and simplified processes.
The Bank has encouraged diaspora remittances through new products, licensing additional International Money Transfer Operators (IMTOs), adopting a willing-buyer, willing-seller model, and ensuring timely naira liquidity access for IMTOs, all aimed at boosting inflows and promoting growth.
Policies Supporting Remittance Inflows
In further efforts to stabilise the naira, the CBN introduced two new financial products for Nigerians in the diaspora, the Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account, designed to streamline remittances, attract investments, and promote financial inclusion.
The CBN said the initiative provides a secure and efficient platform for managing funds and investing in Nigeria’s financial markets. Non-Resident Nigerians can now remit foreign earnings into Nigeria and manage funds in foreign currency or naira, supporting family maintenance, education, and healthcare.
The investment account enables diaspora Nigerians to participate in the local financial markets, investing in bonds, fixed deposits, equities, government securities, and mortgage products. Both accounts offer currency flexibility and convertibility at prevailing exchange rates.
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These innovations align with the CBN’s goal of doubling formal remittance receipts within a year, a move expected to deepen confidence in Nigeria’s financial system and enhance economic stability.
Mohamed Touhami el Ouazzani, Western Union’s regional vice president for Africa, noted in his report “Diaspora Remittances: The Power Behind Africa’s Sustainable Growth” that remittances, beyond being financial flows, change lives. In 2023 alone, Africa received $90 billion in remittances, an amount comparable to the GDP of several nations.
He said, “Remittances symbolise deep ties that keep communities connected across borders. Families with breadwinners abroad depend on these funds for their daily needs, laying foundations for broader financial stability.”
According to him, every remittance is a seed of change, a deliberate investment in Africa’s future. By channeling these funds into key sectors, the diaspora is not just sending money home but building resilient economies across the continent.
