The Nigerian naira ended February 2025 on a positive note, gaining 8.5% month-on-month on the parallel market to close at 1,490/$. However, on the official market, it saw a slight decline of 1.7%, settling at 1,500/$. This mixed performance comes amid ongoing efforts by the Central Bank of Nigeria (CBN) to stabilize the currency and address foreign exchange (FX) challenges.
According to the latest Afrinvest Monthly Market Report, Nigeria’s foreign reserves dipped by 3.2% month-on-month, standing at $38.46 billion as of Thursday. Analysts attributed this decline to the CBN’s efforts to stabilize the naira, particularly through payments for the verified portion of the outstanding $7.0 billion FX backlog.
“In March, we anticipate the naira will maintain its positive performance across FX segments, supported by the CBN’s continued USD supply to Bureau De Change operators (BDCs) and Deposit Money Banks (DMBs), provided there are no adverse market shocks,” the analysts projected.
In recent weeks, the naira has shown mild strength against the US dollar, hovering around the N1,500 band in both the official and parallel markets. However, challenges persist, including weakened global demand for crude oil, Nigeria’s primary source of foreign exchange earnings.
Cowry Asset Research highlighted that Bonny Light crude, Nigeria’s oil benchmark, traded weakly in the international market, shedding $2.36 (3.2%) week-on-week to close at $75.88 per barrel as of Thursday. This decline was driven by reduced global demand, which has weighed on oil prices and, in turn, impacted Nigeria’s foreign reserves.
“The sustained pressure on oil prices resulted in lower dollar inflows into Nigeria’s economy, directly affecting the nation’s foreign exchange reserves. As a result, forex reserves declined by $240 million (0.61%) week-on-week, reflecting weaker oil earnings and highlighting the persistent FX liquidity challenges facing the country,” Cowry Asset Research noted.
At the official market, the naira appreciated marginally by 93 kobo against the dollar, closing at N1,500.15/$. Meanwhile, on the parallel market, it gained N5 to settle at an average of N1,490/$ as demand pressure eased slightly.
Looking ahead, analysts expect the CBN to intensify efforts to defend the naira, including tightening liquidity and enhancing FX supply mechanisms. “In the coming week, we anticipate a continued battle for stability in the forex market as the apex bank takes more decisive steps to support the local currency,” Cowry Asset Research stated.
Despite these efforts, experts warn that challenges such as Nigeria’s mounting debt burden, declining foreign reserves, and high inflation rates could undermine the potential gains of ongoing FX reforms. These factors continue to pose significant threats to the naira’s stability.
As Nigerians navigate these economic uncertainties, many are hopeful that the CBN’s interventions will yield positive results, ensuring a more stable and resilient currency in the months ahead.
