The Naira continued its steady appreciation against the US dollar, rising to ₦1,490/$ in the parallel market on Monday, marking another milestone in the currency’s recovery trend in 2025. This development represents a significant improvement from ₦1,520/$ recorded last week, reflecting a strengthening outlook for the local currency amidst a series of policy interventions by the Central Bank of Nigeria (CBN).
Parallel and Official Rates Narrow Further
The parallel market rate is now only marginally higher than the official rate, which closed at ₦1,501.42/$ on the FMDQ platform. This narrowing gap, a key objective for monetary authorities has been a direct result of improved dollar liquidity, enhanced transparency in the foreign exchange (FX) market, and renewed confidence among investors and market participants.
Policy Reforms Driving the Recovery
The CBN’s multi-pronged approach to FX management, implemented throughout 2024 and early 2025, is widely credited for the Naira’s recovery. These policies have included:
- The prohibition of foreign-currency-denominated collaterals for Naira loans came into effect in April 2024 after a 90-day transition period.
- The revocation of licenses for hundreds of Bureau de Change (BDC) operators, followed by the introduction of stricter regulatory guidelines and a two-tier licensing framework in May 2024.
- The launch of the Electronic Foreign Exchange Matching System (EFEMS) in November 2024, using Bloomberg’s B-Match platform, to promote real-time price discovery and reduce speculative activity.
- The rollout of the Nigerian Foreign Exchange Code (FX Code) in January 2025, aimed at enhancing market conduct and ensuring transparency across the FX ecosystem.
Improved Dollar Supply from Diaspora Remittances
Another critical factor driving the Naira’s recent strength is the increase in remittance inflows via International Money Transfer Operators (IMTOs). Data from the CBN shows that remittance inflows grew by 63% between January and September 2024, reaching approximately $3.8 billion. This boost in supply has helped ease pressure on the FX market, reducing reliance on CBN interventions.
Confidence Boost and Speculative Unwinding
According to analysts, including Zeal Akaraiwe, CEO of Graeme Blaque Advisory, the strengthening Naira also reflects a shift in market sentiment. Speaking on Arise News, Akaraiwe noted that consistent communication from the CBN, combined with tighter regulatory oversight and clearer policies, has gradually restored confidence and reduced speculative demand for dollars.
“In the past, uncertainty around policy direction and inconsistent messaging triggered panic buying of FX,” Akaraiwe explained. “With clearer policies and increased transparency, market participants now have greater confidence, reducing unnecessary demand and allowing natural flows to dictate price movements.”
Reserves Management and Market Sustainability
Despite the positive outlook, concerns remain around Nigeria’s foreign exchange reserves, which saw a planned dip in Q1 2025 due to Eurobond coupon payments and other external obligations. However, the CBN had signalled this expected decline to investors as far back as late 2024, reassuring stakeholders that reserve accretion would resume by Q2 2025, driven by increased oil receipts and further remittance inflows.
Outlook: Will the Naira’s Rally Hold?
While the Naira’s appreciation to ₦1,490/$ is undoubtedly positive, economists caution that structural challenges remain. Nigeria still heavily relies on oil revenues for FX supply, and non-oil exports remain weak. Inflation, which stood at 29.9% in January 2025, also erodes real returns on Naira-denominated assets, limiting long-term investment inflows.
That said, if the CBN sustains its current policy momentum, and external factors such as oil prices and global interest rates remain favourable, the Naira could stabilize further, possibly settling around ₦1,450/$ in the coming weeks.
For now, the narrowing gap between the official and parallel rates marks a notable victory for Nigeria’s monetary authorities, a sign that policy reforms, market confidence, and improved supply dynamics are gradually bringing order to a once chaotic FX market.