Naira gains 7.4% in 2025, first annual rise in 13 years

Nigeria’s naira closed 2025 on a stronger note, recording its first full-year appreciation in more than a decade, as foreign exchange reforms and improved market transparency helped stabilise the currency after years of persistent decline.

Official data from the Central Bank of Nigeria (CBN) show that the naira ended trading on December 31, 2025, at N1,429 to the US dollar, representing a 7.4 per cent appreciation from the N1,535/$1 rate recorded on the final trading day of 2024.

The performance marks a major turnaround for the local currency, which had depreciated every year since 2012. The last time the naira posted an annual gain was in 2012, when it strengthened slightly to N157.29/$1 from N158.99/$1 the previous year.

CBN figures indicate that the naira’s 2025 journey was far from smooth, with sharp volatility in the first half of the year driven by elevated inflation, strong dollar demand, and delayed foreign exchange inflows.

The currency hit its weakest level in April 2025, closing at N1,602/$1, amid mounting macroeconomic pressures. However, a gradual recovery began in May, with the naira improving from N1,585/$1 to N1,532/$1 by June.

Momentum strengthened significantly in the latter part of the year. September emerged as a turning point, with the naira trading below N1,500/$1 for most of the month and closing at N1,478/$1. The rally continued into October, when the currency appreciated to around N1,427.5/$1.

Although the naira experienced a mild pullback in November, closing at N1,446.9/$1, it regained momentum in December to finish the year at N1,429/$1—stronger than both its January opening rate of N1,538.50/$1 and its December opening rate of N1,450.01/$1.

Analysts largely attribute the naira’s improved performance to wide-ranging foreign exchange reforms introduced by the CBN in 2024, which continued to take effect throughout 2025.

One of the most significant outcomes of the reforms has been the narrowing of the gap between the official and parallel market exchange rates to below five per cent, sharply reducing arbitrage opportunities and speculative trading.

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According to Ade Omotosho, analyst at Kwik Securities, improvements in transparency and price discovery were critical to the naira’s recovery in the second half of the year.

“Reforms in the forex market, including improved price discovery and increased transparency, also helped support the naira in the second half of the year,” Omotosho said.

Other market analysts note that allowing market fundamentals to play a greater role in exchange rate determination has helped restore confidence among investors and foreign portfolio participants, even as macroeconomic challenges persisted.

Despite the positive close, analysts caution that sustaining the naira’s gains will depend on continued reform implementation, improved foreign exchange inflows, and progress in taming inflation.

Market watchers say the currency’s performance in 2025 offers measured optimism for 2026, especially if policy consistency is maintained and external shocks are limited.

As part of its reform agenda, the CBN is currently finalising a revised foreign exchange manual aimed at deepening market participation, strengthening oversight, and further enhancing transparency.

Looking ahead, the apex bank’s 2026 Macroeconomic Outlook projects Nigeria’s external reserves to rise to $51.04 billion, supported by improved oil revenues, sustained FX reforms, and stronger capital inflows—factors expected to further underpin stability in the foreign exchange market.

For now, the naira’s rare annual gain has provided a much-needed confidence boost, signalling a potential shift toward greater currency stability after more than a decade of sustained depreciation.