Renewed demand for the United States dollar is putting fresh pressure on Nigeria’s foreign exchange market, raising concerns over the stability of the naira and the potential impact on the prices of goods and services across the country.
Although the naira has remained relatively stable in recent months, buoyed by stronger external reserves, improved crude oil earnings and interventions by the Central Bank of Nigeria (CBN), increased demand for foreign currency by importers, manufacturers and other businesses is beginning to test the market. Recent reports indicate the naira has traded around ₦1,380 to the dollar in the official market, with analysts attributing renewed pressure to rising corporate demand for foreign exchange.
The development comes as the National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation eased slightly to 15.91 per cent in June from 15.93 per cent in May. However, food inflation climbed to 17.52 per cent, marking the fifth consecutive monthly increase and highlighting the continued rise in the cost of essential food items.
Foreign exchange dealers say seasonal demand for dollars to pay overseas school fees, finance summer travel and import raw materials has increased pressure on available dollar liquidity.
To support the naira, the Central Bank retained the Monetary Policy Rate (MPR) at 26.5 per cent, citing the need to maintain price stability amid global economic uncertainties. The apex bank also continues to rely on its growing external reserves, which have risen above $51.8 billion, to support the foreign exchange market.
Economists note that while improved reserves have strengthened confidence in the foreign exchange market, Nigeria’s heavy dependence on imported raw materials, machinery and processed goods means fluctuations in the exchange rate continue to affect domestic prices.
Businesses across several sectors are already feeling the impact. Manufacturers say higher costs of importing equipment and industrial inputs have increased production expenses, while traders report rising replacement costs for imported goods. Food importers are also grappling with higher costs for grains, fertilisers and agricultural inputs, factors that continue to drive food inflation.
Small businesses, particularly retailers, say they have been forced to adjust prices frequently as import costs and transportation expenses continue to rise, reducing consumers’ purchasing power.
Despite signs of macroeconomic stability, including stronger foreign reserves and economic growth, many Nigerians say the benefits have yet to translate into lower living costs. Analysts argue that lasting relief will depend on reducing the country’s reliance on imports by expanding local production, boosting agricultural output and increasing non-oil exports.
They maintain that while monetary policies and foreign exchange reforms have helped stabilise the financial markets, sustained improvements in domestic production remain critical to shielding households and businesses from future exchange rate shocks.