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Editorial Focus: Naira’s Fragile Stability and the Cost of a Widening FX Gap The renewed weakening of the naira in the parallel market to about N1,490 per dollar underscores the fragile state of Nigeria’s foreign exchange market and raises fresh concerns about policy effectiveness. While the official market showed a modest appreciation, closing at N1,417.95 per dollar, the widening gap of N73 between the official and parallel rates—the largest in 11 months—signals persistent structural stress that short-term gains have failed to resolve. At the heart of this divergence is the imbalance between foreign exchange demand and supply. Strong demand, driven by import dependence, dollarisation pressures and unmet FX requests, continues to overwhelm limited supply in the official market. As a result, businesses and individuals are pushed toward the parallel market, where rates more accurately reflect scarcity and risk perceptions. This dynamic weakens confidence in the FX framework and complicates pricing, planning and investment decisions for businesses. The marginal improvement in external reserves to $45.8 billion, supported by oil export earnings and portfolio inflows, offers some reassurance but should not be overstated. Portfolio flows are often volatile, and oil receipts remain vulnerable to price swings and production challenges. Without sustained, diversified inflows, reserve accretion alone cannot stabilise the naira in a meaningful way. For policymakers, the growing official-parallel market gap is a warning sign. It highlights the need for deeper reforms that go beyond liquidity management—including boosting non-oil exports, improving FX transparency, restoring investor confidence and reducing speculative demand. Until these structural issues are addressed, the naira’s apparent stability in the official market will remain fragile, while the parallel market continues to tell a more troubling story about the true state of Nigeria’s foreign exchange system.