The Nigerian naira posted notable gains against the US dollar last week, defying expectations in the absence of direct intervention from the Central Bank of Nigeria (CBN). Official market data showed the naira closing at ₦1,549.35 per dollar, up from ₦1,553 at the start of the trading week.
This appreciation occurred amid heightened demand for foreign exchange, which outpaced the available USD liquidity for intraday settlements. Despite these pressures, the local currency strengthened, even touching an intraday low of ₦1,537 and a high of ₦1,570 during trading.
Simultaneously, Nigeria’s foreign reserves declined for the fourth week in a row, falling by $232.05 million to settle at $38.05 billion. Nevertheless, forward market contracts for the naira saw positive movements, reflecting sustained investor optimism.
According to Cordros Capital Limited, forward rates rose significantly: the 1-month contract appreciated by 1.4% to ₦1,583.16/USD, the 3-month climbed 2.0% to ₦1,642.65/USD, the 6-month advanced 3.0% to ₦1,724.76/USD, and the 1-year jumped 4.8% to ₦1,887.05/USD.
Cordros attributed this performance to renewed inflows from Foreign Portfolio Investors (FPIs), citing increased market confidence despite external risks such as escalating geopolitical tensions in the Middle East.
Looking ahead, analysts project that the CBN will continue to adopt a reactive approach—intervening only when necessary to curb volatility. Zedcrest Research forecasted a tight range of ₦1,600 to the dollar through the second half of 2025 but warned that FX interventions could become less frequent as reserves remain under pressure.
Zedcrest also warned that unmet FX demand—especially in sectors like fuel importation, manufacturing, and financial services—could widen the spread between official and parallel market rates. Premiums in the black market could exceed 5% if these demands persist.
On the fiscal side, Nigeria’s revenue outlook remains constrained by falling oil prices, which are expected to average $60–$65 per barrel, well below the $75 budget benchmark. Even with government efforts to boost security in oil-rich regions and increase crude output to 1.6–1.7 million barrels per day, production levels remain far from the official target of 2.06 million barrels daily.
The expected revenue shortfall—estimated at over $10 billion or 30% of projected government earnings—adds another layer of complexity to the CBN’s strategy to stabilize the naira.
To bridge this gap and defend the currency, experts argue that comprehensive reforms in FX governance and oil revenue management are urgently required. Only then can Nigeria ensure sustainable external balance and long-term currency stability.
