Naira surges to strongest level in 2025 amid CBN reforms, market optimism

The Nigerian naira has reached its strongest level in the unofficial market this year, buoyed by improved market fundamentals and ongoing foreign exchange (FX) reforms by the Central Bank of Nigeria (CBN).

On Tuesday morning, traders in Lagos, Nigeria’s business capital, quoted the naira at N1,520/$ in the parallel market, reflecting renewed confidence in the local currency.

This appreciation comes as investors show increased participation in the Nigerian stock market, even as Treasury bill yields decline.

The naira’s recent gains have been attributed to the CBN’s strategic interventions, including its sale of foreign exchange to Bureau De Change (BDC) operators.

The move has eased liquidity concerns and reduced speculative pressure, allowing the naira to breach the N1,500/$ psychological support level.

The rare period of stability marks a turnaround from the sharp depreciation the naira suffered after Nigeria loosened FX controls in 2023.

Over the past year, the naira had lost approximately 70% of its value against the US dollar due to high demand for foreign currency and limited supply in the official market.

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However, the CBN, under the leadership of Governor Olayemi Cardoso, has implemented key reforms to restore confidence. These include stricter regulations for BDC operators, enhanced supervision of the forex market, and policies aimed at increasing dollar liquidity.

Governor Cardoso recently warned that violations of the newly introduced Nigeria Foreign Exchange (FX) Code would be met with severe consequences.

He reaffirmed the apex bank’s commitment to promoting transparency and ethical conduct in Nigeria’s FX market.

Beyond domestic factors, global economic trends are also influencing currency movements.

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The US Dollar Index, which measures the strength of the greenback against a basket of major currencies, traded above 108 index points on Monday as investors reacted to mixed economic data and new trade tensions.

Investors are closely watching U.S. Federal Reserve Chairman Jerome Powell’s testimony before Congress this week for insights into future interest rate policy. The latest data from the CME FedWatch Tool suggests a 90% probability that the Fed will maintain its current interest rates at its upcoming meeting on March 19.

Meanwhile, the U.S. 10-year Treasury yield has rebounded to 4.50% after hitting an annual low last week. The upcoming release of January’s consumer price inflation data on Wednesday is expected to be a key determinant of future monetary policy decisions. Analysts predict a 0.3% monthly increase in both headline and core consumer prices, with annual inflation figures projected at 2% and 3%, respectively.

With CBN’s continued intervention in the FX market and broader economic reforms, analysts anticipate further stabilization of the naira. However, global market trends, including U.S. trade policies and Federal Reserve decisions, may continue to influence the currency’s trajectory.

For now, the naira’s appreciation signals renewed optimism in Nigeria’s economy and financial markets, reinforcing the impact of ongoing regulatory measures.