The Nigerian naira has experienced a significant depreciation in the black market, reaching a rate of N1,550 per U.S. dollar on March 7, 2025. This decline underscores the persistent challenges facing Nigeria’s foreign exchange market, despite ongoing reforms by the Central Bank of Nigeria (CBN).
Recent Trends in the Naira’s Value
At the start of the week, the naira was trading at N1,500 per dollar in the unofficial market, maintaining this rate for over two weeks. However, a sudden surge in demand for the U.S. dollar led to a sharp depreciation, with the naira falling to N1,550. This trend is consistent with data from other sources, which reported similar fluctuations in the naira’s value during the same period.
Official vs. Parallel Market Rates
In the official market, the naira closed at N1,512 per dollar on March 6, 2025. The disparity between the official and black market rates highlights the ongoing challenges in Nigeria’s foreign exchange system. This gap often leads individuals and businesses to seek better rates in the parallel market, further exacerbating the naira’s depreciation.
Factors Contributing to the Naira’s Depreciation
Several factors have contributed to the naira’s recent decline:
Increased Demand for Foreign Exchange: The demand for U.S. dollars has outpaced supply, leading to a depreciation of the naira. Bismarck Rewane, managing director of Financial Derivatives Company Limited, noted that such adjustments are inevitable when a currency is misaligned from its fair value.
Declining Investor Confidence: Foreign investors withdrew N455.62 billion from the Nigerian stock market in 2024, significantly exceeding inflows and raising concerns about investor confidence.
Global Economic Pressures: Fluctuations in global oil prices and economic uncertainties have impacted Nigeria’s foreign exchange earnings, putting additional pressure on the naira.
CBN’s Efforts and Market Reactions
The CBN has implemented various reforms to stabilize the foreign exchange market, including adjusting interest rates and introducing policies to attract foreign investment. Despite these efforts, the naira continues to face volatility, suggesting that further measures may be necessary to achieve long-term stability.
Outlook for the Naira
Analysts predict that the naira will continue to face challenges in the near term. Forecasts suggest that the USD/NGN currency pair could reach ₦1,754.30 by November 2025, indicating a potential further depreciation of the naira.
This outlook underscores the need for comprehensive strategies to address the underlying issues affecting Nigeria’s foreign exchange market.
The recent drop of the naira to N1,550 per U.S. dollar in the black market reflects ongoing challenges in Nigeria’s foreign exchange system. Factors such as increased demand for foreign currency, declining investor confidence, and global economic pressures have contributed to this depreciation. While the CBN’s reforms aim to stabilize the market, achieving long-term stability will require addressing these underlying issues comprehensively.
According to Adedayo Bakare, CEO Money Africa, “N50 depreciation isn’t anything unusual given the recent volatility of recent”. He argues that the naira’s earlier appreciation was largely driven by the Central Bank of Nigeria’s (CBN) dollar sales rather than improvements in fundamental economic factors such as oil prices, exports, or foreign investment. Given these weak underlying fundamentals, a reversal was inevitable once the CBN’s interventions slowed. However, Bakare warns that the real issue is not just short-term depreciation but broader structural weaknesses: falling reserves, declining oil prices, lower money market rates, and growing doubts about Nigeria’s inflation data. With uncertainty surrounding the true state of Nigeria’s reserves and continued investor skepticism, forex liquidity remains fragile.
Adedayo offers a bruising assessment of why foreign portfolio investors remain hesitant about Nigeria. He notes that even as a Nigerian, he questions whether investing in the country makes sense given the current economic and policy environment.
One major deterrent is that advanced markets, particularly the U.S., offer far better value. The U.S. government has been borrowing at nearly 5% for an extended period, making dollar-denominated assets far more attractive than Nigerian investments.
Another key issue is the lack of transparency around Nigeria’s foreign reserves. At one point, net reserves were reportedly below $5 billion. While CBN Governor Olayemi Cardoso has emphasized clearing FX backlogs, he has not provided clarity on the actual state of reserves or whether the CBN still has significant outstanding dollar liabilities. This uncertainty makes it difficult for investors to assess Nigeria’s true external position.
Additionally, Nigeria’s oil and gas sector—a critical source of FX inflows—remains in decline. International Oil Companies (IOCs) continue to exit, new investments are scarce, and there are no alternative sectors generating meaningful export revenue. This lack of foreign exchange inflows further weakens investor confidence.
Bakare also highlights the broader economic crisis, which has only been contained because most major Nigerian corporates do not carry significant dollar debt. However, local equities have suffered greatly—companies like Nestlé Nigeria and MTN Nigeria have seen their valuations plummet. Even after devaluation, naira-denominated products remain uncompetitive, meaning the country has not benefited from a strong non-oil export boost.
Finally, he points to the CBN’s handling of money supply and liquidity, which he describes as inadequate. Poor monetary policy management has contributed to ongoing instability, reinforcing investor concerns about the naira’s long-term trajectory. Adebayo said “Nigeria is in a deep crisis that has only been contained because most corporates do not have dollar debt. Check Nestle and MTN, their equity has been wiped off”.
According to Jimi Ogbobine, Head of Agusto Consulting, “Given that N50 is somewhere around 3%, it should be a point of worry especially from portfolio investors”. He emphasizes that the primary monetary objective should now be achieving currency stability around the CBN’s desired anchor rate. He suggests that rather than focusing on appreciation, the central bank should prioritize sustaining stability—even if that means maintaining the naira around the N1,500/$ level.
