Naira slips to N1,583/$ at official market amid forex reserve dip, BDC recapitalization pressure

The Nigerian naira began the new week on a weaker note, sliding to ₦1,583/$1 at the official market on Monday, May 26, 2025.

This marks a depreciation from ₦1,579/$1 recorded last Friday, according to fresh data from the Central Bank of Nigeria (CBN), and signals a pause in the currency’s brief appreciation streak observed last week.

Intraday Fluctuations Signal Market Fragility

CBN data shows that during Monday’s intraday trading, the naira fluctuated between ₦1,578/$1 and ₦1,583/$1, with a simple average of ₦1,579.65/$1, reflecting a tight but fragile trading band.

Against other global currencies, the naira displayed mixed performance. It weakened against the British pound, closing at ₦2,141.32/£1, compared to ₦2,136.75/£1 on Friday. However, it appreciated slightly against the euro, firming to ₦1,796.79/€1, up from ₦1,791.95/€1 at the end of last week.

READ ALSO: Naira strengthens for third consecutive day as external reserves rebound to $38.53bn

Parallel Market Shows Slight Naira Strength

In the parallel market, the naira gained modestly against the U.S. dollar, appreciating to ₦1,618/$1 on Monday, compared to ₦1,620/$1 on Friday. This continues a cautious upward trend from ₦1,627/$1 recorded at the start of the previous week, according to market data from Lagos-based traders.

Despite its dollar gains, the naira lost ground against other major currencies in the unofficial market. It exchanged for ₦2,160/£1 on Monday—worse than ₦2,150/£1 on Friday, and a reversal from the more favorable ₦2,135/£1 seen on Thursday. The pound-naira rate in the parallel market has fluctuated sharply in recent sessions, pointing to underlying volatility.

Forex Reserves Decline Slightly Amid BDC Uncertainty

The CBN also reported a dip in Nigeria’s foreign exchange reserves, which fell to $38.55 billion as of Friday, May 23, 2025. This is a slight drop from $38.56 billion the day before, following a brief but notable rebound earlier in May when reserves rose by $364 million between April 30 and May 14.

The latest decline comes amid heightened uncertainty in the Bureau De Change (BDC) sub-sector. Recent disclosures by the Association of Bureau De Change Operators of Nigeria (ABCON) reveal that less than 5% of licensed operators have so far complied with the new capital requirements imposed by the CBN.

With a June 3, 2025 deadline looming, anxiety has gripped the market, as hundreds of BDC operators may be forced out of business unless the CBN grants an extension.

READ ALSO: Naira strengthens as CBN reports FX stability, surge in reserves

In May 2024, the apex bank introduced sweeping reforms to the BDC framework, raising the minimum capital for Tier 1 BDC licenses to ₦2 billion, and ₦500 million for Tier 2 licenses, up from the previous ₦35 million threshold.

The move is part of broader efforts to sanitize the forex market, enhance transparency, and clamp down on currency speculation and illicit arbitrage.

Analysts: Policy Clarity, Market Liquidity Remain Crucial

Market analysts say the naira’s short-term trajectory will hinge on central bank liquidity interventions, clarity of monetary policy, and investor confidence in ongoing reforms. With reserves under pressure and BDC operations at a crossroads, stability in the forex market remains tenuous.

“We’re seeing the interplay of multiple forces—global inflation, interest rate pressures, and local regulatory reforms—converge to create short-term volatility,” said Dr. Emeka Ugo, a currency analyst with Lagos-based Arvo Capital. “The CBN needs to clearly communicate its policy direction to anchor expectations and avoid market overreactions.”

As the countdown to the BDC recapitalization deadline begins, stakeholders are watching closely to see how the CBN navigates the delicate balance between reform enforcement and market stabilization.