Market News

THE Central Bank of Nigeria (CBN) injected $580 million into the foreign exchange (FX) market in May 2025 as part of aggressive efforts to stabilize the naira and bolster market confidence. This intervention came despite a continued decline in the country’s external reserves, which stood at $38.045 billion by the end of May—raising concerns over the long-term sustainability of such measures.

Market data reviewed by analysts showed that the central bank’s intervention aimed to relieve pressure caused by strong dollar demand and declining oil revenues, which had pushed the naira to its weakest levels in the first half of May. At one point, the exchange rate reached N1,614/$1.

However, the CBN’s swift response—combined with inflows from exporters and foreign portfolio investors—led to improved FX liquidity and a modest recovery in the naira. According to AIICO Capital Limited, the local currency traded within a relatively narrow range of N1,575 to N1,610/$1 throughout the month, closing at N1,586.15/$1—a 66-basis-point improvement over April levels.

The central bank’s move was in line with its strategy of direct sales to authorised banks, which has become a key policy lever for managing short-term volatility. While the intervention helped reduce panic and maintain a semblance of exchange rate stability, experts warn that relying on external reserves to support the naira may not be sustainable without a corresponding increase in dollar inflows.

“The CBN has shown its willingness to defend the naira,” said one market analyst. “But the concern remains: how long can it continue this level of support without significantly depleting reserves?”

Notably, the naira’s slight recovery came amid broader signs of financial stabilisation. Nigeria successfully cleared its obligations to the International Monetary Fund (IMF) by May 2025, slashing its debt from $3.54 billion in December 2020 to zero. This achievement has been lauded as a major milestone for the country’s creditworthiness.

Further strengthening investor sentiment, Moody’s Investors Service recently upgraded Nigeria’s sovereign credit rating from Caa1 to B3 with a stable outlook, citing improved fiscal policies, the removal of fuel subsidies, exchange rate reforms, and enhanced revenue collection under President Bola Ahmed Tinubu’s administration. Additionally, Moody’s raised Nigeria’s local currency ceiling to Ba3 and the foreign currency ceiling to B2, reflecting improved economic fundamentals.

Another positive indicator has been the steady rise in remittance inflows. According to official figures, diaspora remittances via International Money Transfer Operators (IMTOs) rose by 44.5% in 2024, reaching $4.76 billion—up from $3.30 billion in 2023. These inflows have added a crucial layer of support to Nigeria’s FX market and overall external buffer.

Despite the gains, the parallel market continues to reflect underlying demand pressure. The naira closed at N1,617.50/$1 in the unofficial market in May, falling by N11 as demand for hard currency remained strong.

While the CBN’s interventions have stabilized the market in the short term, analysts agree that Nigeria must continue to deepen its structural reforms