Naira Depreciation Hits Two-Month Low Amid Liquidity Crunch and Weak Detty December Inflows

The Nigerian naira weakened to a two-month low last week, trading at N1,466.5 to the dollar at the official forex market on December 19, 2025. This marks a steady depreciation from N1,454/$1 recorded earlier in the week, signaling renewed volatility after a period of relative stability in the currency market. Analysts say the dip reflects broader liquidity issues in the forex market.

Currency traders point to a combination of factors fueling the naira’s decline. Foremost among them is a liquidity crunch driven by foreign investors repatriating dividends, cautious portfolio inflows, and heightened demand for dollars by Nigerians who prefer holding foreign currency as a store of value. “There is no total confidence in the naira,” said Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON).

The much-anticipated “Detty December” inflows, typically a source of forex liquidity from Nigerians in the diaspora, have not arrived in expected volumes. According to traders, much of the inflow is being intercepted by unlicensed operators or moving through informal channels, reducing its impact on street liquidity. Umar Badaru, a BDC operator, noted that year-end obligations and import payments have further widened the gap between demand and supply, intensifying pressure on the naira.

The Central Bank of Nigeria (CBN) has stepped in to stabilize the market, injecting $150 million into the forex system and licensing 82 new BDC operators to strengthen retail liquidity. Gwadebe said these interventions are expected to ease pressures and restore confidence, particularly in the retail sector, which has long been dominated by unregulated actors.

Despite these efforts, Nigeria’s foreign exchange reserves recorded a decline for the first time in 25 weeks, dropping by $263 million to $45.21 billion as of December 17. Analysts warn that slower inflows, reduced foreign portfolio investments, and low FDI, compounded by high dollar demand and the controversial Capital Gains Tax, continue to weigh on the naira’s stability, leaving the currency vulnerable to further volatility.

source: nairametrics