Forex: Parallel Market Premium Has Shrunk By 48% In 3 Years, Says Cardoso

Governor of the Central Bank of Nigeria, Olayemi Cardoso, has said reforms in Nigeria’s foreign exchange market have significantly narrowed the gap between the official and parallel market rates, with the premium shrinking from about 50 per cent in 2022 to less than two per cent in 2025.

This is because the value of the naira appreciated by 2 per cent last week, selling at N1, 366.23 against the dollar, while the currency remained unchanged at the parallel market, where it sold at N1, 410 to the dollar.

Cardoso, speaking in Lagos, noted that the improvement followed deliberate policy actions by the apex bank to dismantle distortions in the foreign exchange market and restore transparency.

“Our commitment to transparent, well-governed, and functional markets is clear in the foreign exchange market. Through deliberate policy actions, we eliminated the system of multiple exchange rates that had previously benefitted only a privileged few. At the same time, we reduced the parallel market premium from around 50 per cent in 2022 to less than two per cent on average in 2025,” he stated.

The CBN governor explained that the reforms have improved liquidity in the foreign exchange market and strengthened investor confidence, noting that market participants can now transact more efficiently without relying on extraordinary central bank interventions.

“Today, the foreign exchange market operates with far greater liquidity and efficiency. The backlog of unmet demand has been cleared, and market participants can transact without relying on extraordinary Central Bank interventions,” he said.

Cardoso added that the relative stability currently being observed in the naira was the result of deliberate policy measures aimed at rebuilding trust in the financial system.

“To be clear, the relative stability of the currency we are seeing today is not an accident but the result of deliberate efforts to rebuild trust and strengthen the confidence of both domestic and international investors,” he said.

He further revealed that capital and investment inflows into Nigeria have increased significantly in recent years due to the reforms. “We have also seen almost a 200 per cent increase in capital and investment flows between 2023 and 2025,” he noted.

Noting that Nigeria’s external reserves have strengthened, reflecting improvements in the country’s balance of payments position, he said: “Our external reserves have recently exceeded 50 billion dollars, reflecting structural improvements in our balance of payments and increasing investment flows into the Nigerian economy.”

The CBN governor stressed that the macroeconomic reforms implemented over the past two years have strengthened Nigeria’s position to withstand global economic shocks, including geopolitical tensions and volatility in global energy markets.

“Today, the global economy is facing renewed shocks, including continued geopolitical tensions and the latest developments in the US–Israel–Iran conflict. But the macroeconomic reforms and policy buffers we have built over the past two years have placed Nigeria in a far stronger position to navigate these challenges. The storms may come, but our house will stand firm.”

He maintained that strengthening the foundations of the financial system remains central to the central bank’s strategy for supporting long term economic stability and growth. “By strengthening the capital foundations of our banks and ensuring that our financial markets are transparent and well governed, we are also strengthening the foundations of economic growth itself,” Cardoso added.