The Nigerian naira closed the month of May 2025 with a mixed performance across the official and parallel foreign exchange markets, highlighting the continued volatility in Nigeria’s forex environment despite recent monetary and fiscal reforms.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira appreciated marginally by 0.7 per cent month-on-month to settle at ₦1,586.15/$1. In contrast, the parallel market reflected slight depreciation, with the naira sliding by 1.2 per cent to ₦1,615.00/$1.
This dual trend underscores the ongoing recalibration within Nigeria’s forex landscape, with the Central Bank of Nigeria (CBN) implementing structural reforms to strengthen monetary stability, improve reserves, and build investor trust.
Speaking exclusively with The Punch, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, expressed cautious optimism about the naira’s medium-term prospects. “Several macroeconomic indices have started to favour the naira,” he said. “Our reserves are growing, fuel importation is dropping significantly due to local refining capacity, and transparency in the FX market is restoring investor confidence.”
Gwadabe cited increased capital inflows, declining IMF obligations, and reduced pressure on external reserves as critical elements reinforcing naira strength in the official market. He noted that the naira appreciated by ₦10 against the dollar during the final trading days of May alone, a development driven largely by market discipline and improved liquidity management.
International credit rating agency, Moody’s, recently upgraded Nigeria’s long-term foreign and local currency issuer ratings from Caa1 to B3, citing reforms in the foreign exchange market as a key driver of the improved outlook. The agency highlighted the CBN’s decision to collapse multiple FX windows into a single unified market as a turning point in restoring balance of payments and boosting external reserves.
According to Moody’s, “These reforms have reduced Nigeria’s vulnerability to external shocks by correcting previous currency misalignments and ensuring better forex liquidity distribution. The exchange rate now reflects true market demand and supply dynamics.”
The CBN’s strategy has already led to an increase in net foreign reserves from $8 billion in 2022 to $23 billion by the end of 2024. These reserves now cover seven months of import bills and represent 283 per cent of Nigeria’s external debt repayment obligations.
Despite the progress, Moody’s also warned of emerging risks due to declining global oil prices. With projections indicating a 16 per cent drop in oil prices by 2025, the CBN could face reduced forex inflows from crude exports—Nigeria’s primary revenue source. This could limit its ability to intervene in the market to stabilize the naira further.
Economists suggest the government should intensify efforts to diversify revenue sources and sustain structural reforms. “What we’re seeing is not yet stability—it’s fragile progress,” said investment analyst Ifeoma Chukwu. “Fiscal discipline, reduced subsidy burdens, and a robust tax base will be essential in protecting these early wins.”
Looking forward, market analysts and stakeholders advocate for sustained policy clarity, transparency, and collaboration between the CBN, fiscal authorities, and the private sector. Gwadabe added that ensuring stable macroeconomic conditions, managing inflation, and enforcing compliance within the banking and FX ecosystem would be vital to supporting the naira’s continued appreciation.
The naira’s mixed performance in May reflects both the progress and challenges in Nigeria’s journey to a fully liberalized, investor-friendly forex regime. While the official market shows signs of recovery, the disparity in the parallel market remains a concern. The coming months will test the resilience of Nigeria’s FX reforms amid fluctuating oil revenues and global market shifts.