Business

Naira strengthens as CBN reports FX stability, surge in reserves

Published

12 months 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.