The Nigerian naira showed modest strength on Tuesday, appreciating slightly against the U.S. dollar in the official foreign exchange market, even as the greenback weakened globally to its lowest point since February 2022.
According to data from the Central Bank of Nigeria (CBN), the naira improved to N1,527/$ on the official Nigerian Foreign Exchange Market, up from N1,532/$ on Monday—marking a N5 gain in value.
The modest appreciation, while welcome news for a currency that has endured months of pressure, comes amid a concerning decline in Nigeria’s external reserves, which dropped by $3.05 billion in the first half of 2025—from $40.88 billion at the end of 2024 to $37.37 billion as of June 2025.
However, while the naira gained at the official window, it slipped on the parallel (black) market, depreciating to ₦1,585/$ on Tuesday from ₦1,570/$ the previous day—reflecting a growing disparity between formal and informal currency channels.
Nigeria’s ongoing battle with a weakened currency is fueling a surge in public debt, largely due to inflated foreign liabilities.
As of Q1 2025, Nigeria’s total debt stock stood at N149.39 trillion, up N27.72 trillion year-on-year from N121.67 trillion. According to the Debt Management Office (DMO), this represents a 22.8% increase, with currency depreciation identified as a key driver.
The federal government has adopted a strategy of leveraging public-private partnerships (PPPs) and concessionary financing to reduce reliance on external borrowing. However, fiscal pressures remain intense, especially as government revenue continues to lag behind expenditure.
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President Bola Ahmed Tinubu recently signed into law four major tax reform bills aimed at broadening Nigeria’s revenue base, boosting investment, and increasing the country’s tax-to-GDP ratio, which remains one of the lowest globally.
While the naira fights local economic headwinds, the U.S. dollar is grappling with global market sentiment that continues to shift against it.
The dollar index (DXY)—which measures the greenback’s strength against six major world currencies—rose slightly to 96.744 on Tuesday, but remains close to its overnight low of 96.373, near levels not seen since September 2021.
The decline follows dovish remarks by Federal Reserve Chair Jerome Powell, who, speaking at the European Central Bank’s annual conference in Portugal, signaled caution on future interest rate moves. While not confirming a rate cut, Powell left the door open, saying decisions would hinge on incoming economic data.
Markets are now eagerly awaiting Thursday’s U.S. non-farm payrolls report, which will provide critical insight into the Fed’s likely next steps. The greenback had temporarily firmed after stronger-than-expected job openings data from the JOLTS report, but downside risks remain.
Political developments are also weighing heavily on the dollar. Former President Donald Trump’s sweeping tax-and-spending proposal, estimated to add $3.3 trillion to the national debt, has stirred concerns over fiscal discipline and further pressured the currency.
In a closed-door session, Trump reportedly presented Powell with a chart comparing global interest rates and insisted U.S. rates should be closer to those of Japan (0.5%) and Denmark (1.75%)—raising fresh concerns about central bank independence.
As the naira makes fragile gains in formal channels, analysts warn that underlying fundamentals remain shaky, with mounting debt, falling reserves, and inflationary pressures continuing to undermine confidence.
Meanwhile, the weakening U.S. dollar could offer some relief for Nigeria’s import-heavy economy—if matched by stronger domestic reforms and improved investor sentiment.