Nigeria’s external sector is going through a serious transformation, with the Central Bank’s foreign exchange reforms at the center of it all. Since mid-2023, the CBN has shifted away from being the dominant force in the FX market and is now pushing for a more market-determined exchange rate. The introduction of policies like the “willing buyer, willing seller” system and the unification of multiple FX windows has begun to close the gap between the official and parallel rates. These changes are part of a broader effort to improve transparency, reduce rent-seeking, and build a more resilient economic structure.
In the first quarter of 2025, the numbers started to reflect these changes. Nigeria recorded a net FX inflow of $15.2 billion, with total inflows hitting $28.92 billion, an 18.7% increase from last year. Outflows also rose to $13.72 billion, but mostly due to higher import volumes and repatriation by foreign investors. With foreign reserves now above $38 billion, the country has nearly 10 months of import cover. This boost in reserves and more stable FX flows suggest the reforms are beginning to yield real, tangible outcomes, even if cautiously so.
A key driver of this new FX landscape is the increasing contribution from Nigeria’s diaspora. The CBN rolled out new account types—NRNOA and NRNIA, specifically for Nigerians abroad, making it easier to send money home or invest. These moves helped push remittance inflows up by 8.9% to $20.93 billion in 2024, while official channels like IMTOs saw a 43.5% surge. At the same time, Nigeria’s non-oil exports are growing, up 24.7% in Q1. With the CBN stepping back from daily FX intervention, market participants—rather than the government, are now setting the tone.
Still, global conditions have played their part. Higher oil prices, currently averaging $84 a barrel, and a pause in US rate hikes have attracted foreign capital and supported Nigeria’s FX stability. But the country isn’t out of the woods. Nigeria’s heavy reliance on oil revenue and exposure to global risk trends means external shocks could quickly unravel gains. The CBN’s use of digital tools like EFEMS and new ethical codes for dealers shows commitment to transparency, but sustaining reform momentum depends on strong political will and disciplined implementation.
One major challenge that can’t be ignored is inflation. At 24.23% in March 2025, inflation continues to weaken household income and drive up the cost of living. Although exchange rate reforms have helped reduce market distortions, naira depreciation has made imported goods more expensive. The IMF expects inflation to average 26.5% this year, and possibly spike higher next. Without tackling this head-on, Nigeria risks undoing progress in the FX market. Going forward, real stability will depend not just on smart policy, but also on how well the government can manage inflation, strengthen institutions, and create an investor-friendly climate.
Source: Punch