Naira Shows Resilience Despite Declining Reserves, Backed by CBN Reforms and Investor Confidence
Despite a noticeable decline in Nigeria’s external reserves, the naira has held steady in both official and parallel markets, signaling growing confidence in recent monetary reforms. Data from the Central Bank of Nigeria (CBN) reveals an 8% drop in gross reserves, down to $37.84 billion as of April 28, 2025, from $40.88 billion at the start of the year. Yet, this has not negatively affected the exchange rate. In fact, since January, the naira has appreciated steadily following the rollout of the Electronic Foreign Exchange Matching System (EFEMS) and the introduction of forex codes.
At the Nigerian Foreign Exchange Market (NAFEM), the naira gained 3.8% against the dollar in the past four months, closing at N1,599.70 compared to N1,661.12 in December 2024. Parallel market trends reflected a similar story, with the naira appreciating by 3.2%, or N52, year-to-date. The latest data shows the dollar was exchanged for N1,608, compared to N1,660 at the beginning of the year. Although dollar inflows to NAFEM declined from $1.42 billion to $735 million week-on-week, the central bank remained a significant contributor, accounting for over 33% of the inflows.
According to a World Bank report, despite past weaknesses, where the naira saw a 40% depreciation in 2024, Nigeria is making progress toward a unified and market-determined exchange rate regime. The report highlighted that reforms have led to improved FX liquidity and reduced volatility, strengthening the naira’s position in early 2025. This aligns with the CBN’s strategic approach to managing the exchange rate through transparent, rules-based policies.
Further bolstering confidence, CBN Deputy Governor Muhammad Sani Abdullahi spoke at a global forum in New York, citing rising FX turnover, signs of disinflation, and a gradual rebound in reserves as evidence of recovery. The IMF’s Kristalina Georgieva also weighed in, urging emerging economies like Nigeria to maintain exchange rate flexibility to absorb external shocks. Combined, these perspectives underscore a cautious but optimistic outlook for the naira and Nigeria’s broader economic path.
Source: Punch