Why the Naira's Value Changes
Before June 2023 Nigeria had several exchange rates at once. Understanding what replaced them explains most of what has happened to prices since.
An exchange rate is a price — the price of one currency in another. Like any price, it moves when supply and demand move. What changed in Nigeria in 2023 was not that principle, but who was allowed to set the price.
What existed before
Until June 2023 Nigeria operated a segmented foreign exchange market. Different categories of buyer accessed dollars at different rates through different windows, with the Central Bank determining who got what. The gap between the official rate and the street rate was wide and persistent.
That arrangement required the CBN to supply dollars at a rate below what the market would bear. It worked for as long as reserves allowed, and produced rationing, a queue of unmet demand, and a large parallel market.
The June 2023 float
On 14 June 2023, the CBN issued a circular abolishing market segmentation. All windows were collapsed into the Investors' and Exporters' window, and the "willing buyer, willing seller" model was reintroduced. The official rate became the weighted average of the previous day's trades in that window.
The immediate effect was a sharp repricing: from roughly ₦460 to the dollar to around ₦750 within days. Further sharp movement followed in late January and February 2024.
Two things are worth separating here. The float did not cause the naira to be worth less — it revealed what the market already thought it was worth, at a rate the CBN had been suppressing. But the timing and speed of that revelation had real consequences for anyone holding naira or pricing imported goods.
How the market works now
The I&E window was later renamed the Nigerian Foreign Exchange Market (NFEM). On 12 October 2023 the CBN formally recorded unification under willing-buyer, willing-seller and lifted the long-standing ban on FX access for 43 restricted import items. A Nigerian FX Code was issued on 28 January 2025.
Trading infrastructure was upgraded too. The Electronic Foreign Exchange Matching System (EFEMS) went live on 1 December 2024, running on Bloomberg's BMatch platform, with a minimum tradable amount of US$100,000 for interbank trading between authorised dealers. EFEMS is not a separate rate window — it is the plumbing inside NFEM.
The current regime is best described as a managed float: a single market window, market-determined pricing, with CBN intervention when it chooses.
Where the rate sits
As at 25 September 2026, NFEM opened at approximately ₦1,326 to the dollar, trading between ₦1,325.82 and ₦1,327.00. The parallel market was around ₦1,370 to ₦1,380 — a spread of roughly ₦46 to ₦54.
External reserves stood at US$54.61 billion in mid-September 2026, up about 30.5% year on year.
A narrow spread between the official and parallel rates is the clearest single indicator that a float is functioning. A wide spread means rationing has returned somewhere in the system.
What actually moves the rate
Four things dominate:
- Oil earnings. Crude remains Nigeria's largest source of foreign currency. When oil revenue rises, dollar supply rises.
- Imports. Nigeria imports heavily — fuel, wheat, machinery, pharmaceuticals. Every import is dollar demand.
- Interest rates. A higher policy rate makes naira assets more attractive to hold, which supports the currency. This is one reason the CBN's rate decisions and the exchange rate move together.
- Confidence. Expectations are self-fulfilling in currency markets. If holders expect depreciation, they move into dollars, which produces depreciation.
Remittances from Nigerians abroad are a fifth, increasingly significant, source of dollar supply.
Why this shows up in your prices
Because a large share of what Nigerians buy is either imported or made with imported inputs. When the naira weakens, the naira price of those goods rises. That is the transmission channel from the exchange rate to food prices, transport fares and school fees.
It also runs the other way. Food inflation began easing through 2026 in part because the currency stabilised.
Frequently asked questions
Is the parallel market illegal? Trading through unlicensed operators is not authorised. The existence of a parallel market is not itself a crime, but the CBN licenses bureaux de change and dealers, and operating outside that licensing is a regulatory breach.
Why is the official rate different from what I get at the bureau? Because they are different markets with different participants, costs and volumes. A modest spread is normal. A large one signals unmet demand in the official market.
Does a weaker naira help anyone? It makes Nigerian exports and Nigerian-made goods cheaper for foreign buyers, and it raises the naira value of dollar earnings, including remittances. It hurts anyone buying imports, which is most households.
Sources
- CBN circular abolishing segmentation, 14 June 2023 — full text
- Unification, FX Code and EFEMS — CBN Reforms
- EFEMS guidelines — CBN FAQ (PDF)
- Rate and reserves, 25 September 2026 — WithinNigeria