Nigeria’s foreign exchange market has experienced a sudden and significant shift.

For the first time in roughly three years, the gap between the official exchange rate set in formal channels and the parallel (black) market rate has widened sharply, topping a N90 difference per US dollar.

This divergence marks the largest premium since the Nigerian government floated the naira in 2023.

The spread between the rates reflects deeper stresses in the economy. While the official market has seen some stability, demand pressures in the parallel market are pushing the informal rate higher.

Understanding why this gap has re-emerged and what it means for the naira and everyday Nigerians is critical.

What’s driving the rate gap higher?

Economists and market watchers say the divergence is largely being driven by rising demand for physical US dollars.

Ahead of the 2027 general elections, political actors, businesses, and individuals are reportedly stocking up on cash dollars, intensifying demand in informal channels.

That stockpiling is pushing the parallel market rate up even as the official market remains stable due to increased dollar supply.

According to a BusinessDay, report, the “official” rate typically reflects transactions in regulated FX windows, like banks and licensed forex platforms.

In contrast, the parallel rate, often called the black-market rate, shows what dealers and individuals are willing to pay when dollars are harder to get through formal systems.

When the gap widens, it signals friction between supply and demand across these two segments of the market.

This spread is also influenced by broader economic dynamics.

Recent PwC analysis before this surge noted that factors like rising non-oil import demand, foreign education and travel spending, and stronger consumption of financial assets could contribute to pressure on FX markets, potentially widening the premium between official and parallel rates.

FX reforms and market confidence

Since 2023, Nigeria’s Central Bank (CBN) has made crucial changes, including moving toward a unified, market-determined exchange rate system and lifting multiple price controls that previously distorted FX pricing.

These reforms helped narrow the gap at times, restoring confidence and attracting more foreign participation in Nigerian markets.

In 2025, for example, the CBN’s efforts to unify rate windows and improve transparency, including electronic trading systems, saw the spread narrow sharply at points and brought in higher foreign exchange liquidity.

The hope was that these structural changes would reduce arbitrage opportunities and better balance FX supply and demand.

Yet the recent spike in demand for physical dollars ahead of elections has overshadowed those gains, pushing the gap wider even as the official rate remains anchored.

That suggests that despite policy progress, market sentiments and real cash demand continue to play a powerful role in shaping FX realities on the ground.

What FX market gap means for Nigerians

For ordinary Nigerians, a wider parallel market premium can translate into higher costs for imported goods and services and more expensive travel and education abroad.

Businesses that rely on dollars for inputs may see operating costs rise, and remittance flows could face increased volatility.

Policymakers are likely to monitor the situation closely. If the spread continues to widen, it may prompt further interventions to boost forex liquidity or tighten speculative behaviour in informal markets.

In the meantime, the FX gap serves as a vivid reminder that Nigeria’s currency challenges remain far from settled, even amid ongoing reforms.