Business

Naira strengthens as CBN reports FX stability, surge in reserves

Published

1 year ago

May 21, 2025

The naira recorded its second straight day of appreciation in the parallel market on Tuesday, trading at N1,625/$1, a slight improvement from N1,627/$1 on Monday.

At the official market, the naira also posted gains, closing at N1,588.50/$1, up from N1,597/$1 the previous day, ahead of the Central Bank of Nigeria’s (CBN) milestone 300th Monetary Policy Committee (MPC) meeting.

Intra-day trading showed continued volatility, with rates fluctuating between N1,580/$1 and N1,601.5/$1.

Speaking during a post-MPC press briefing in Abuja, CBN Governor Olayemi Cardoso highlighted a major achievement in Nigeria’s monetary environment—foreign exchange (FX) volatility has dropped below 0.5%, compared to over 4% a year ago.

“If you look at the exchange rate, volatility has reduced from over 4% a year ago to less than half of 1% now. That’s an indication of stability,” Cardoso said.

He credited this development to a series of monetary and fiscal reforms aimed at rebuilding macroeconomic confidence, including: Liberalisation of the FX market; Unification of exchange rates; Market-driven reforms to increase FX supply

In a notable disclosure, Cardoso revealed that Nigeria’s net external reserves have risen sharply from just over $3 billion to about $23 billion, calling it a “quantum leap.”

The surge is attributed to growing investor confidence, resumed transparency in reserve reporting, and the return of previously sidelined market participants.

Gross external reserves, which hovered around $33–34 billion in early 2024, are projected to increase further due to stronger oil earnings, decreased demand for fuel imports, and rising non-oil exports, especially in natural gas.

At its historic 300th session, the MPC unanimously voted to retain all key monetary policy parameters: Monetary Policy Rate (MPR): 27.5%; Asymmetric Corridor: +500/-100 basis points around the MPR; Cash Reserve Ratio (CRR): 50% for Deposit Money Banks, 16% for Merchant Banks and Liquidity Ratio: 30%

All 12 committee members voted in favor of maintaining the current stance, emphasizing continuity and the need to consolidate recent gains in Nigeria’s macroeconomic environment.