The Nigerian naira has experienced a decline of N20.82 against the US dollar, reversing its two-month streak of steady appreciation. In December 2024, the naira gained more than 8%, and in January 2025, it strengthened by over 4%. However, recent trading data shows a depreciation trend.
During December, the exchange rate fluctuated between N1,500 and N1,693 per US dollar, ultimately closing at N1,535.82 in the Nigerian Foreign Exchange Market (NFEM) window. According to AIICO Capital Limited, this represented an 8.18% appreciation. In January, the exchange rate continued to improve, recording a 4.3% gain.
The two-month rally of the naira was driven by increased foreign exchange (FX) sales by the Central Bank of Nigeria (CBN) to commercial banks. This move was aimed at boosting the supply of US dollars and meeting foreign payment demands. Other contributing factors included FX inflows from international oil companies, foreign portfolio investors, and export proceeds, all of which enhanced market liquidity.
As a result, the naira maintained relative stability in the foreign exchange market, trading between N1,500 and N1,700. However, last week, the FX spot rate briefly strengthened, dipping below N1,500 per US dollar. Despite these gains, the naira depreciated at the official exchange market on Monday, closing at N1,495.60 per dollar. Data from the FMDQ Security Exchange revealed that this represented a N20.82 drop from the previous trading session.
This depreciation amounts to a 1.4% loss compared to the closing rate of N1,474.78 per dollar recorded on Friday, January 31. The ongoing FX reforms initiated by the CBN have contributed to improved transparency in the currency market, attracting foreign investors, and increasing confidence in Nigeria’s financial system.
The CBN has also implemented measures to strengthen the role of Bureau de Change (BDC) operators in the retail FX market. On Tuesday, January 28, the CBN granted a waiver on the 2025 annual license renewal fee for all existing BDC operators. Additionally, on Monday, February 3, the bank extended the deadline for selling dollars to BDCs from January 31 to May 30.
Meanwhile, Nigeria’s foreign reserves declined further, settling at $39.723 billion at the end of January. This decrease followed consecutive FX interventions by the CBN aimed at stabilizing the naira. The decline in reserves occurs amid global market uncertainties, including volatility in the commodities sector.
Crude oil prices, which initially rose by over $1, later fell as the United States and Mexico announced a temporary suspension of planned tariffs. Brent crude was trading at approximately $75.49 per barrel, while West Texas Intermediate (WTI) was priced around $72.49 per barrel.
In the precious metals market, gold prices surged to an all-time high due to increased demand for safe-haven investments. Concerns over inflation, exacerbated by US-imposed tariffs on Canada, China, and Mexico, contributed to the price increase. Gold is currently valued at about $2,821.62 per ounce. Analysts predict continued volatility, with potential domestic energy market disruptions resulting from tariffs on Canadian energy imports.