Why Everyone’s Watching the Naira
If you’ve been keeping an eye on the currency exchange scene lately, you’ve probably noticed something unusual—but promising. After months of volatility and decline, the Nigerian naira has been staging a quiet but determined comeback across both the official and parallel markets. And no, this isn’t one of those short-lived spikes driven by artificial injections of forex or sentiment hype.
This time, the rally appears deeper and more structural.
Between early May and June 2025, the naira strengthened for seven consecutive days, with the official rate gaining almost ₦200 against the dollar—shifting from the ₦1,500 range to around ₦1,350. On the parallel market, which had seen the naira trade well above ₦1,800 earlier in the year, the currency has pulled back to about ₦1,420 per dollar.
So, what exactly is fueling this rally? Why is it happening now? And—more importantly—what does it mean for you, whether you’re a household breadwinner, a small business owner, or someone trying to figure out if Nigeria is finally turning the economic corner?
Let’s break this down step-by-step.
Timeline of the Naira’s Recent Performance
To understand how far we’ve come, it helps to look back at how far we’d fallen. The first quarter of 2024 was brutal for the naira. With the Central Bank of Nigeria (CBN) floating the currency, massive demand for foreign exchange met a supply bottleneck. As a result, the naira hit historic lows, tumbling to over ₦1,800 per dollar on the black market and spooking both investors and everyday Nigerians.
By March 2024, market confidence was flatlining. There were fears that if the CBN didn’t act decisively, the naira could breach ₦2,000/USD. But then, from April 2024, signs of coordinated FX reform and capital inflows began to emerge.
Fast forward to May 2025: after sustained reform momentum, improved FX liquidity, and renewed investor confidence, the naira staged its most sustained rally in over a year.
This rally didn’t just materialize out of nowhere—it was the result of deliberate action.
Official Market Dynamics: CBN’s Role in Supporting the Naira
The CBN hasn’t been sitting idle. Under Governor Olayemi Cardoso, Nigeria’s apex bank has pursued a bold FX reform agenda aimed at unifying rates, restoring liquidity, and attracting capital inflows.
Here’s what changed:
Interest Rate Hikes
In February and March 2024, the CBN raised the Monetary Policy Rate (MPR) significantly—from 18.75% to 22.75%, and later to 24.75%. This made naira-denominated assets more attractive to foreign investors.
FX Market Tools
The CBN launched a Bloomberg FX trading platform and later upgraded the Nigerian Autonomous Foreign Exchange (NAFEM) window, including enhanced reporting and a more liberal spread regime.
CBN Dollar Sales
The CBN resumed weekly FX sales to BDCs (Bureau de Change operators) at rates close to the NAFEM window. This bridged the official-parallel market gap and reduced arbitrage.
Increased Transparency
Improved disclosures, including daily FX turnover reports and the introduction of the “BMatch” FX matching system, reassured the market.
These moves calmed speculative attacks, provided clarity to investors, and allowed the official exchange rate to stabilize within a tighter range.
Parallel Market Movement: Bridging the Rate Gap
The naira’s rally isn’t just happening on paper or inside CBN walls. It’s showing up in the streets—literally.
In 2023, the gap between the official and parallel market was sometimes over ₦300. By June 2025, that spread has narrowed dramatically, hovering around ₦50–₦70.
Why does this matter?
Because the parallel market is where most Nigerians—especially importers, students, and travelers—source their dollars. A narrower gap means lower costs for school fees, medical bills abroad, and foreign business inputs.
The BDC dollar sales program—where the CBN sells directly to registered BDCs at more market-reflective rates—has reenergized the retail FX segment, flooding the street with dollars and dampening speculative demand.
When the CBN offered dollars at ₦1,021 in early 2024 and then gradually adjusted closer to market rates (₦1,350 by May), the parallel market stopped being the only realistic option. Demand began to normalize, and panic buying receded.
External Drivers: Oil, Remittances, and FDI Inflows
Let’s be real: Nigeria’s economy is still heavily oil-dependent, and FX inflows often ride on Brent crude prices.
With oil prices remaining stable above $80 per barrel since Q1 2025—and Nigeria pumping around 1.5 million barrels per day—oil revenue has improved. The NNPCL’s renewed efforts to reduce oil theft and improve export transparency are helping here too.
Remittances have also surged. The World Bank estimates remittance inflows to Nigeria crossed $20 billion in 2024, with strong flows in early 2025. The diaspora is trusting formal FX channels again—especially with more realistic rates at banks and fintechs.
Meanwhile, capital inflows—particularly foreign portfolio investments—have returned. High naira interest rates (20–25%) on Nigerian bonds are pulling in investors hungry for yield, especially those avoiding U.S.-China trade tensions.
The IMF’s $2.8 billion Special Drawing Rights (SDR) disbursement and a likely $1.5 billion World Bank budget support loan are expected to further strengthen reserves and liquidity.
Structural FX Reforms: What Changed Behind the Scenes
This rally isn’t just the result of short-term interventions. There are deeper reforms creating lasting impact:
Unification of FX Windows
The multiple exchange rate windows have been collapsed into the NAFEM window. This reduces confusion and builds investor confidence.
Market-Led Pricing
The CBN has shifted from managing the naira’s value to letting it find equilibrium—within reason. This builds credibility and reduces the temptation for round-tripping and hoarding.
Reopening of Dormant FX Channels
The CBN has revived direct remittance platforms and fintech-led diaspora remittance systems like Flutterwave’s Send and PayDay. This eases friction in FX transfers and adds liquidity.
Improved Reserve Management
By paying down FX forwards and clearing some backlog to foreign airlines and investors, the CBN sent a clear message: it’s cleaning house.
Business and Consumer Impact: Winners and Temporary Losers
If you’re running a business in Nigeria, especially one reliant on imports or international payments, the naira’s rally means your dollar costs just dropped. This is good news if you import electronics, pay for international software, source industrial raw materials, or pay school fees abroad.
But for exporters or those earning in dollars (like freelancers and oil exporters), the rally could squeeze your margins temporarily—especially if you’d gotten used to converting at ₦1,800+ per dollar.
For average Nigerians, the impact will take a few months to filter through. Ideally, a stronger naira should mean cheaper imports, reduced inflation, and eventually lower food and fuel prices. But there’s a lag, and not all businesses are quick to pass on savings.
Still, sectors like aviation, manufacturing, and retail are already feeling relief in FX sourcing. Airlines that were owed hundreds of millions of dollars in ticket repatriation funds are seeing backlogs cleared. Manufacturers are no longer buying dollars at inflated black-market rates, allowing more predictable pricing and less inventory risk.
Risks to the Rally: Could the Gains Be Reversed?
As promising as this rally is, it’s not bulletproof. The naira remains vulnerable to several structural risks:
Oil Production Shocks
If sabotage or underinvestment hits Nigeria’s oil output, FX inflows will dip. With oil still funding over 80% of FX inflows, this remains a weak point.
Reform Fatigue
Policymakers must resist the temptation to reverse liberalization under political pressure. Any move to return to rate fixing or subsidy-style FX allocations will spook investors.
Inflation and Fiscal Indiscipline
Headline inflation is still above 30%. If the government doesn’t manage fiscal spending or reform its fuel subsidy regime, pressure could build again on the naira.
External Shocks
Global recession fears, U.S. Fed hikes, or geopolitical tensions (e.g., Red Sea trade disruptions) could tighten global dollar liquidity, hurting Nigeria’s FX inflows.
So far, the rally is holding. But it will need ongoing discipline and investor-friendly policy consistency to become a long-term recovery, not a temporary bounce.
What This Means for You—And What to Watch Next
If you’ve got business expenses in dollars, this is a good time to reassess your pricing, re-negotiate contracts, or restock inventory. If you’re a freelancer or entrepreneur earning FX, this might be a time to diversify your savings and consider locking in exchange rates if you expect future weakening.
Watch these indicators to see if the rally is sustainable:
- CBN FX reserves (if they keep rising, confidence builds)
- Parallel market rates (if they stay within ₦50 of the official rate, stability is holding)
- Investor flows into Nigerian bonds (a signal of global trust)
- Inflation figures (if headline inflation slows, the naira’s purchasing power improves)
- Policy direction from the presidency and the Ministry of Finance
There’s also political signaling to consider. The presidency has made FX reform a cornerstone of its economic revival plan. If it continues to back the CBN and maintain market confidence, the naira could end the year closer to ₦1,200—if global conditions stay favorable.
Strong Policy, Stronger Naira?
The naira’s recent rally isn’t a fluke. It’s the result of real policy adjustments, renewed investor interest, and gradual rebuilding of trust in Nigeria’s macroeconomic direction.
That doesn’t mean we’re out of the woods. The road to full FX stability is long, and it hinges on political will, oil revenue stability, and reforms not just at the CBN but across fiscal institutions and trade policy.
But for now, the message is clear: the market sees Nigeria trying. And in a region where currencies have been falling like dominoes, a rising naira is more than just a number—it’s a signal of potential economic healing.
So whether you’re exchanging dollars, pricing goods, or just trying to make ends meet, don’t overlook what this rally could mean for your pocket and peace of mind.
