The Nigerian naira appreciated modestly in the official foreign exchange market, closing at N1,527 to the US dollar, up from N1,532 the previous day, according to the Central Bank of Nigeria (CBN). This gain, although minor, signals a positive movement amid sustained pressure on the local currency. However, in contrast, the naira weakened slightly in the parallel market, sliding to N1,585 per dollar compared to N1,570 the day before, reflecting the continued divergence between official and unofficial rates.
Despite the naira’s official market rebound, Nigeria’s external reserves have taken a hit, falling by $3.05 billion in the first half of 2025. From a high of $40.88 billion at the end of 2024, reserves dropped to $37.37 billion in June, highlighting the ongoing stress on the country’s foreign exchange position. This decline adds to concerns about the sustainability of gains in the official exchange market and the broader economic pressures facing the country.
A key driver of Nigeria’s growing economic pressure is its rising public debt, now totaling N149.39 trillion, a 22.8% increase from last year. This surge, primarily due to the naira’s depreciation inflating foreign-denominated obligations, has strained the national budget. In response, President Bola Tinubu has signed four new tax bills aimed at improving revenue collection and attracting investors. These reforms are intended to boost Nigeria’s low tax-to-GDP ratio and reduce the country’s dependency on external borrowing.
Globally, the US dollar has slumped to its lowest point since February 2022 amid dovish signals from Federal Reserve Chair Jerome Powell and uncertainty over Donald Trump’s expansive tax-and-spending proposal. Speaking in Portugal, Powell indicated that any decision on rate cuts would depend on upcoming economic data, increasing the significance of Thursday’s non-farm payrolls report. Although the dollar index nudged up to 96.744, it remained near the lower end of its recent range.
Trump’s proposal, expected to add $3.3 trillion to the US national debt, and his public critiques of Powell’s leadership have raised concerns about the Fed’s independence. He even presented Powell with annotated charts comparing US and global interest rates, arguing for significantly lower borrowing costs. These political developments have compounded pressure on the dollar, further benefiting emerging market currencies like the naira — at least in the short term — and setting the stage for continued market volatility.
Source: Nairametrics