Nigeria’s exchange rate strengthened significantly in January 2025, appreciating by N63.72 to close at N1,474.78 per dollar on January 31, marking its highest level in seven months. The last time the currency traded at a similar rate was on June 11, 2024. The rise has been linked to policies implemented by the Central Bank of Nigeria (CBN), which have contributed to the market’s stability and increased confidence among investors and traders.
The naira opened the year at N1,538.50/$ and experienced fluctuations before beginning a sustained appreciation from mid-January. It closed at N1,506/$ on January 29, further rising to N1,474.78/$ by month-end. In the parallel market, the currency also strengthened, trading at N1,610/$ on February 2, compared to N1,630/$ the previous day. Market participants attribute the gains to CBN’s recent foreign exchange policies, which have influenced the liquidity and pricing mechanisms in the market.
Key policy interventions, such as the introduction of the Electronic Foreign Exchange Matching System in December 2024 and the Nigeria Foreign Exchange Code in January 2025, have played a pivotal role in stabilizing the currency. The matching system ensures transparency in price discovery, while the FX Code enforces ethical conduct and governance in foreign exchange transactions. These measures align Nigeria’s FX market with global best practices and have boosted investor confidence.
Despite the naira’s appreciation, Nigeria’s foreign exchange reserves declined by $1.11 billion in January 2025, falling to $39.77 billion from $40.88 billion at the beginning of the month. This represents a 2.72% decrease, attributed to CBN’s interventions in the FX market, external debt servicing, and capital outflows. The decline suggests that a portion of the reserves may have been used to stabilize the naira and manage liquidity in the official exchange market.
With the naira at its strongest level in months and foreign reserves at a three-month low, analysts are closely watching how the CBN will balance exchange rate stability and reserve management. If the currency continues its upward trend, market confidence may rise further, potentially attracting more foreign investments. However, sustaining these gains will depend on external economic conditions, monetary policies, and global market trends.
Source: Punch