Renowned economist Taiwo Oyedele has identified illicit demand as the primary factor undermining Nigeria’s foreign exchange (FX) market. Speaking at a recent economic forum, Oyedele highlighted how unauthorized transactions, speculative trading, and unregulated capital flows have intensified pressure on the naira, exacerbating exchange rate volatility.
According to Oyedele, the prevalence of illicit demand distorts the supply-demand dynamics in the FX market, making it difficult for genuine businesses and individuals to access foreign currencies at stable rates. He emphasized the need for stricter regulatory oversight and collaborative efforts to curb activities that undermine the integrity of the financial system.
“The root cause of the FX instability lies in the significant volume of foreign exchange being channeled toward unproductive or illegal purposes. This not only depletes reserves but also creates artificial scarcity, driving up costs for legitimate transactions,” Oyedele explained.

He further pointed out that speculative activities, fueled by weak confidence in the naira, contribute to artificial demand surges. This situation is compounded by economic uncertainties and inconsistent policy measures, which often discourage foreign investment and limit FX inflows.
To address these challenges, Oyedele proposed several solutions, including enhancing transparency in the FX allocation process, promoting the adoption of digital payment systems to track transactions, and strengthening enforcement against money laundering and other financial crimes. He also called for improved monetary and fiscal policy alignment to stabilize the economy and boost investor confidence.
The economist stressed the importance of diversifying Nigeria’s export base to increase foreign exchange earnings and reduce dependency on crude oil revenues, which are highly susceptible to global market fluctuations. Encouraging the growth of non-oil sectors, such as agriculture, manufacturing, and technology, could provide more sustainable FX inflows over time.
As Nigeria continues to grapple with FX challenges, Oyedele’s insights offer a roadmap for addressing underlying issues and fostering a more resilient currency system. Policymakers and financial institutions now face the critical task of implementing these recommendations to restore stability and ensure equitable access to foreign exchange for all stakeholders.
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