The supply of dollars in Nigeria experienced a significant surge following the central bank's decision to remove restrictions on the purchase of foreign currency necessary for importing 43 specific items. This move aimed to curb the 40% depreciation of the naira this year.

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As per Chapel Hill Denham, an investment bank based in Lagos, liquidity at the official foreign exchange market for investors and exporters increased by over five times, reaching $407.7 million on Thursday after the central bank's announcement. According to Umar Salisu, a data-compiling trader, the naira saw an increase in value for the first time in three weeks in the parallel market on Friday.

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“The supply was mainly from sources outside the central bank but I expect central bank supply to increase,” Tajudeen​​​​ Ibrahim, head of research at Chapel Hill said. The announcement on Thursday “is an indication that the central bank wants to be more frequent in its intervention,” which will moderate the rate in the parallel market, he said.

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Nigeria, the largest crude oil producer in Africa, has faced persistent challenges in bolstering its supply of dollars, primarily due to declining oil revenues that have left its foreign exchange reserves in a precarious state. In response, authorities ceased selling foreign currency to importers of items like rice, vegetables, and chicken, with the aim of promoting local production.

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However, this action only exacerbated the demand for dollars in the unofficial market. On Friday, the naira rose by 0.3% to 1,042 against the dollar in the parallel market, according to Salisu.President Bola Tinubu's decision to allow the currency to trade with greater flexibility temporarily narrowed the gap between the official and parallel-market exchange rates.

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Nonetheless, the spread began widening again in August, driven by an insufficient supply of official dollars and heightened demand in the parallel market.The central bank's objective is to eliminate the 27% premium in the parallel market concerning the official rate of 759.20 naira to a dollar. This effort is intended to boost the confidence of foreign investors.

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The central bank’s ability to win investor confidence and stabilize the market will depend on the country’s capacity to amass dollars, Ibrahim said. “If there is no inflows to the central bank and to the government from crude oil sales and borrowing, then we may see the intervention dissipate faster than expected.”

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