The Nigerian naira has shown relative stability in foreign exchange (FX) markets despite fluctuating dollar inflows from the Central Bank of Nigeria (CBN) and an 8% year-to-date decline in the country’s gross external reserves, which dropped to $37.84 billion by late April 2025 from $40.88 billion at the start of the year.
The naira’s resilience follows reforms such as the CBN’s Electronic Foreign Exchange Matching System (EFEMS) and updated FX regulations, which contributed to its appreciation since January.
In the official Nigerian Foreign Exchange Market (NFEM), the naira strengthened by 3.8% against the dollar, closing at N1,599.70/$1 in April compared to N1,661.12/$1 in December 2024. Similarly, in the parallel market, it gained 3.2%, trading at N1,608/$1 in April versus N1,660/$1 in January.
Data from Coronation Merchant Bank revealed mixed inflows: the NAFEM window saw $735 million in inflows in late April, down from $1.42 billion the prior week. The CBN contributed 33.47% of these inflows, while foreign portfolio investors (FPIs), non-bank corporates, and exporters accounted for 11.99%, 31.76%, and 21.17%, respectively. Forward rates indicated future pressures, with the 1-year contract reaching N2,074.22/$1.
Post-Easter, the CBN’s dollar sales surged, representing 50% of weekly inflows. However, the naira experienced minor volatility, slipping 0.2% to N1,602.63/$1 in official trading after the holiday, while holding steady at N1,610/$1 in the parallel market.
Foreign reserves dipped slightly to $37.88 billion by mid-April, and the naira weakened marginally against the Chinese yuan, closing at N219.16/CNY.
Net FX inflows into Nigeria fell to $4.79 billion in January 2025, down 4.4% from December 2024, as total inflows dropped to $9.63 billion. CBN-related inflows plummeted to $2.33 billion from $4.09 billion, while autonomous sources rose to $7.31 billion.
Outflows also declined, resulting in a net CBN outflow of $1.47 billion, offset by a $6.26 billion net inflow from private sector activities, underscoring the growing role of non-CBN channels in FX dynamics.
WHAT YOU SHOULD KNOW
The naira’s stability in April 2025, despite falling reserves and fluctuating CBN dollar supplies, reflects the success of recent reforms like EFEMS and the growing role of non-CBN FX inflows. Challenges such as reserve depletion, forward rate pressures, and external vulnerabilities highlight the fragility of this stability.
Nigeria’s FX dynamics underscore the broader challenges of managing currency stability in a resource-dependent, import-heavy economy.
Sustained reforms, diversified inflows, and structural economic changes will be critical to ensuring the naira’s resilience in the face of ongoing pressures.
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