Nigeria’s naira has staged an impressive recovery in recent weeks, rebounding from a historic low of N1,900 per US dollar to around N1,500 in both the official and parallel markets. This rebound has invited comparisons with Türkiye’s lira crisis in 2021 (first by a BusinessDay journalist), when a similar rally preceded an even sharper collapse.
Lessons from Türkiye: Short-Term Gains, Long-Term Pain
In 2021, Türkiye’s lira lost almost half its value in a matter of weeks. A subsequent policy-driven surge gave markets temporary relief, but the underlying economic weaknesses—particularly unconventional monetary policies and rising external debts—ultimately triggered another spiral. By mid-2022, the lira had sunk to new lows.
Nigeria’s Parallel Path and the Road Turkiye Abadoned
The Central Bank of Nigeria (CBN) has taken aggressive steps to steady the naira, including injecting billions of dollars into the foreign exchange market and cracking down on speculative trading. While these actions have temporarily boosted confidence, the sustainability of this newfound stability remains in question.
Türkiye’s defence of the lira in 2021-2022 was extraordinary in scale. Between December 2021 and March 2022 alone, Türkiye’s central bank burned through approximately $17 billion in reserves to prop up the lira. This came against the backdrop of total reserves of around $109 billion, a relatively stronger buffer than Nigeria’s.
Nigeria, by contrast, spent approximately $8 billion defending the naira between January and March 2025, a significant intervention relative to its total reserves of just $32 billion as of February 2025. This means Nigeria has expended a quarter of its reserves in just three months—a far higher proportion than Türkiye did at the height of its crisis.
The imbalance becomes even more concerning when comparing export bases. In 2023, Türkiye’s exports stood at approximately $255 billion, diversified across manufactured goods, textiles, machinery, and food products. Nigeria’s total exports in 2024, by contrast, were just over $63 billion, with over 80% reliant on crude oil. This narrow export base leaves Nigeria’s external earnings far more vulnerable to commodity price swings, compared to Türkiye’s relatively diversified export economy.
In mid-2022, after months of heavy intervention failed to halt the lira’s decline, Türkiye effectively abandoned its aggressive currency defence strategy. The central bank sharply reduced its direct interventions, allowing the lira to float more freely. This shift was partly forced by dwindling reserves and rising pressure on the government’s external finances. Instead of defending the lira at all costs, Türkiye pivoted towards a mix of selective capital controls, incentives for lira savings, and unconventional financial instruments like FX-protected deposits to stabilize confidence—though these measures ultimately did little to address the underlying structural weaknesses.
Unsustainable Support?
Nigeria’s currency defence has also relied heavily on borrowing. The government raised $4 billion to shore up its reserves, further entrenching the country’s external debt burden. Such aggressive spending and borrowing have indeed brought the exchange rate down to around N1,500-N1,600, but analysts warn this is not sustainable. If external reserves deplete without fundamental improvements in Nigeria’s productive capacity and export earnings, the naira could slide again, much like the lira did.
Inflation and Economic Projections
As of January 2025, Nigeria’s inflation rate stood at a daunting 34.8%. Despite this, the CBN projects 2025 GDP growth at 4.17%, pinning its hopes on economic reforms to stimulate investment and boost productivity.
Budget Pressure
Further complicating the picture, Nigeria’s parliament passed a 2025 budget of N54.99 trillion, significantly larger than the initial proposal by the presidency. This budget includes a deficit of N13 trillion—3.89% of GDP—and relies heavily on oil revenues, despite mounting concerns over the global energy transition and fluctuating production volumes.
Oil Production and the Dangote Factor
In February 2025, Nigeria’s oil production ticked up by 70,000 barrels per day, partly due to improved security and growing domestic demand from the Dangote refinery. This marginal improvement contributed to OPEC’s broader production increase, but Nigeria’s oil dependency leaves the naira exposed to external shocks.
Cracks in the Policy Framework
Despite CBN’s interventions, Comercio Partners, in a 2025 outlook, warned that policy fragmentation—conflicting fiscal and monetary directives—could drive the naira back towards N1,700 in the second half of the year. With oil revenues insufficient to meet forex demand and non-oil exports still weak, the naira remains vulnerable to both global headwinds and domestic policy inconsistencies.
False Confidence or Real Recovery?
The Nigerian Economic Summit Group (NESG) has projected an average exchange rate of N1,300 to the dollar for 2025—but this is contingent on successful reforms, including improved tax collection, reduced fiscal deficits, and strengthened export capacity. Meanwhile, CBN Governor Olayemi Cardoso has expressed confidence in the naira’s resilience, citing increased remittance flows and market reforms. The question is how deep are ongoing reforms ?
Structural Reforms: The Only Real Solution
While Nigeria’s forex interventions can momentarily calm the markets, the real test will be whether the government addresses deeper structural issues—such as import dependence, low industrial productivity, and a narrow export base. Without these reforms, the naira’s trajectory may mirror Türkiye’s, where short-term stability gave way to long-term fragility.
