CBN Injects $4.1bn to Stabilise Naira Amid Reserves Decline, Analysts Warn of Sustainability Risks
In the first half of 2025, the Central Bank of Nigeria (CBN) injected $4.1 billion into the foreign exchange market, more than triple the $1.3 billion deployed during the same period in 2024, in a bid to stabilise the naira amid persistent volatility. This intervention reflects a 215% increase and is detailed in a recent report by CSL Stockbrokers, a member of the FCMB Group. The naira showed modest appreciation from N1,535/$ to N1,530/$ during the period, but analysts have raised concerns over the sustainability of such aggressive monetary support given dwindling oil revenues and external reserve pressures.
Despite the significant FX injections, Nigeria’s gross external reserves dropped by $3.67 billion from $40.88 billion in January to $37.21 billion by June. This contrasts with a $1.17 billion increase in the same period of 2024. The report highlighted that April saw the most intense intervention, when the naira temporarily weakened to N1,630/$ due to global trade tensions. Analysts observed that while interventions helped avoid sharper depreciation, they simultaneously depleted reserves and underlined Nigeria’s vulnerability to external shocks and weak inflow sources such as declining oil exports and foreign direct investment.
Looking ahead, CSL projects that continued FX pressures could limit naira appreciation, with the currency likely to trade within the N1,500–N1,600/$ band. The firm expects the CBN to possibly cut interest rates by 100–150 basis points in Q4 2025 as inflation eases from 31.4% in 2024 to an average of 22.9% in 2025. While this could stimulate economic activity, it might also weaken the naira by making local assets less attractive to foreign investors. CSL revised Nigeria’s GDP growth forecast slightly downward to 3.7%, citing sluggish consumer spending and reduced exports as key drags.
Economists and business leaders had differing views on the CBN’s approach. Some experts, including Mr. Adewale Abimbola and Dr. Femi Egbesola, defended the intervention, citing the importance of stability for investor confidence and business planning. Others, such as David Adonri and Teslim Shitta-Bey, questioned the sustainability of frequent interventions, warning that Nigeria lacks the foreign reserves strength of countries like Saudi Arabia. They stressed the need for structural reforms to improve non-oil FX inflows and warned that excessive reliance on CBN support could distort the market.
Private sector stakeholders, including the Nigerian Association of Small-Scale Industrialists and the Centre for the Promotion of Private Enterprise, commended the CBN’s efforts, noting that the interventions brought much-needed predictability to the FX market. They argued that while the exchange rate remains high, the reduced volatility is beneficial for planning and business operations. However, they also emphasized that periodic interventions are not a long-term solution. To ensure sustainable currency stability, stakeholders urged the government to enhance manufacturing capacity, improve export value chains, and attract more stable capital inflows through structural economic reforms.
Source: Punch