Investment firm Comercio Partners projects that the naira could depreciate to approximately ₦1,700 per dollar by mid-2025, highlighting enduring structural and policy misalignments. While the Central Bank of Nigeria (CBN) implements monetary interventions, a lack of cohesion with fiscal policies continues to undermine economic stability.
Misaligned Fiscal and Monetary Policies
Nigeria’s economic management suffers from a disconnect between fiscal and monetary strategies. The CBN has introduced measures such as the Electronic Foreign Exchange Matching System (EFEMS) and adjusted interest rates to stabilize the naira. However, these efforts are often counteracted by fiscal policies that do not align with monetary objectives, leading to a fragmented approach that limits the effectiveness of short-term measures and leaves the naira vulnerable to external shocks.
Reliance on Eurobonds and Short-Term Financing
To address immediate foreign exchange challenges, Nigeria has turned to Eurobond issuances. While these provide temporary relief, their impact is fleeting without accompanying structural economic reforms. Overreliance on such short-term financing solutions without addressing underlying economic issues perpetuates the naira’s instability and increases the nation’s debt burden.
Dependence on Fuel Imports and Limited Export Capacity
The country’s heavy reliance on fuel imports is a primary driver of dollar demand, exerting continuous pressure on the naira. Coupled with a limited capacity to generate sustainable dollar inflows through exports, this dependence exacerbates currency instability. Efforts to diversify the economy and boost export capacity have been insufficient, leaving the naira susceptible to external economic fluctuations.
Short-Term Measures vs. Long-Term Stability
The CBN’s interventions, including EFEMS and rate adjustments, demonstrate potential for short-term stabilization but fall short of addressing the naira’s underlying vulnerabilities. Without a holistic, coordinated effort between monetary and fiscal authorities, these measures are unlikely to ensure sustained currency appreciation and broader economic resilience. Comercio Partners emphasizes that only through such coordinated efforts can Nigeria achieve long-term economic stability.
Nigeria’s fragmented policy approach and structural economic challenges continue to expose the naira to significant vulnerabilities. A comprehensive and coordinated strategy is essential to strengthen the currency and achieve sustainable economic growth.
