The naira began the week on a slightly weaker note, depreciating to N1,583 per dollar at the official foreign exchange window on Monday, according to the Central Bank of Nigeria (CBN). This marked a minor decline from Friday’s closing rate of N1,579/$1, ending the local currency’s brief winning streak in the official market last week.

In Monday’s intra-day trading, the naira fluctuated within a narrow band between N1,578 and N1,583 to the dollar, recording an average rate of N1,579.65. The data signals continued volatility, although the naira has generally performed better in recent weeks after months of steep depreciation.

Mixed Moves Against Major Currencies

Despite the dollar weakness, the naira posted mixed results against other leading global currencies. It lost ground against the British pound, falling to N2,141.32/£1 on Monday, compared to N2,136.75/£1 last Friday. However, it strengthened slightly against the euro, appreciating to N1,796.79/€1 from N1,791.95/€1.

Naira Strengthens Slightly in Parallel Market

In the unofficial parallel market, often seen as a reflection of real-time demand, the naira appreciated modestly, trading at N1,618/$1 on Monday compared to N1,620/$1 on Friday. This slight gain extends the naira’s recent trend of stability in the street market, having previously held firm at N1,620/$1 on Thursday and Friday after strengthening from N1,625/$1 on Wednesday and N1,627/$1 at the start of the previous week.

However, the naira’s performance in the parallel market was less favorable against the British pound. It fell to N2,160/£1 on Monday, compared to N2,150/£1 on Friday. This rate was weaker than Thursday’s N2,135/£1 but still an improvement from Wednesday’s N2,155/£1 and Tuesday’s N2,145/£1. The naira had begun last week at N2,142/£1.

Foreign Reserves Edge Lower as CBN Pushes BDC Reforms

Meanwhile, Nigeria’s foreign exchange reserves declined slightly, dropping to $38.55 billion as of Friday, May 23, 2025. This represents a small reduction from $38.56 billion the previous day, according to updated CBN data.

The reserves had recently shown signs of recovery, gaining $364 million between April 30 and May 14. That rebound marked the first notable upswing in 2025, offering a brief window of optimism for Nigeria’s external buffers.

The current dip in reserves comes amid heightened efforts by the Central Bank to clean up the Bureau De Change (BDC) segment of the forex market. As part of sweeping reforms, the apex bank had significantly raised the capital requirements for BDC operators—raising the bar from N35 million to N2 billion for Tier 1 licenses and to N500 million for Tier 2 licenses.

Only 5% of BDCs Meet New Capital Thresholds

Industry watchers now warn of a potential shakeout in the BDC landscape, with widespread anxiety gripping the market. According to the Association of Bureau De Change Operators of Nigeria (ABCON), less than 5% of licensed operators have successfully met the new capital thresholds set by the CBN.

With the June 3, 2025 recapitalization deadline fast approaching, many BDC operators face the risk of losing their licenses unless the central bank grants an extension. This uncertainty adds another layer of complexity to the country’s foreign exchange environment, already strained by liquidity challenges and inflationary pressure.

CBN Tightens Grip Amid Drive for Transparency

The capital hike for BDCs is part of the CBN’s broader strategy to sanitize the forex market, enhance regulatory oversight, and discourage rent-seeking behavior. These reforms, initiated in May 2024, were designed to plug leakages, curb speculative demand, and boost confidence in Nigeria’s financial system.

However, the implementation has triggered debate among stakeholders, with some warning that smaller players in the BDC space could be pushed out of business, thereby reducing forex access for retail buyers and fueling further volatility.

As the naira continues its delicate balancing act across multiple markets, analysts say the weeks ahead will be crucial in determining whether current reforms can provide long-term currency stability or trigger unintended consequences in an already fragile economy.