Market News

Nigeria has turned the corner. The stability of its currency has provided the fuel that drives appetite for the nation and its assets.

Never mind that the naira was adjudged the third worst currency in the world in October 2024, the currency has now become the chiefest reason for investor excitement.

It gained N16.03 against the United States dollar in May and is set to maintain a stable trajectory this month, according to financial analysts. There are no more surprises in the foreign exchange market as the naira has remained stable for much of the year, closing at 1,586.15/$ on May 30 at the Nigerian Foreign Exchange Market (NFEM) as against N1,490/$ on February 28.

“Next month, we anticipate that the naira will maintain similar performance across foreign exchange (FX) segments, supported by CBN’s continued intervention,” analysts at Afrinvest Securities Limited said.

They suggested that ongoing efforts by the central bank could help manage the volatility and reinforce confidence in the market.

And investors are excited. Capital inflows into the economy jumped from $0.33 billion in January 2024 to $2.06 billion in the corresponding month of 2025, the Central Bank of Nigeria (CBN) said in its monthly Economic Report for January.

This marked a 524.24 percent increase in one year. Inflows had stood at $1.57 billion in December 2024 and represented a 32.12 percent rise month-on-month.

Nigeria became the regional powerhouse in private capital investment in 2024, securing $3 billion in deals between 2020 and 2024, according to data from the African Private Capital Association (AVCA). The $3 billion represented 66 percent of all deals and 52 percent of total deal value in West Africa over the period.

Nigeria has attracted a $600 million lithium processing plant near the Kaduna-Niger border this year. This will be commissioned this quarter, said Deke Akake, solid minerals minister. The nation has likewise lured a $200 million lithium refinery on the outskirts of Abuja slated for commissioning before the third quarter (Q3) of 2025. Altogether, $800 million has come into Nigeria through the solid minerals sector so far.

Reuters reported that Afreximbank has invested in Nigeria’s oil industry, spurring the nation’s oil refining capacity to 1.3 million barrels per day and transforming the Gulf of Guinea into a strategic refining hub for Africa.

At one of BusinessDay events held in Lagos, speakers said seven out 10 people coming into Nigeria are foreigners. And they are coming to either look at startups or the fixed income/stock market. Or even direct investments.

Naira-based investments are better

At the West African segment of the 21st AVCA Conference and VC Summit held recently in Lagos, investors and startup founders agreed that naira-based financing offers investors a return pathway. They noted that dollar-based financing is increasingly unsustainable amid ongoing devaluations across West Africa.

The investors noted that returns on dollar-denominated funds have eroded due to currency losses.

Gbenga Hassan, managing partner at Argentil Capital Management, advocated for more naira-denominated investments since local firms raise revenue in naira.

He highlighted that funds raised in naira are more likely to return 10 times more in a couple of years than those generated in dollars, which would have to grapple with the naira’s depreciation.

“We need more local investors,” he emphasised.

Naira’s journey in 2015

The naira’s journey in 2025 has been mixed. After beginning the year on a strong note, it later came under significant pressure, depreciating from N1,475/$ at the end of January to N1,586/$1 on May 30 at the official market. At the parallel market, the local currency exchanged around N1,620/$ in late May, indicating a narrowing gap between official and parallel market rates.

A broader comparison with 2024 performance shows the naira has shown relative resilience and stability in the face of global headwinds and domestic pressures.

Ifeanyi Uba, head of research at Commercio Partners, explained that daily fluctuations in the exchange rate have moderated significantly when compared to 2024, signaling growing market confidence and increased transparency in FX operations.

“Despite this, there’s a silver lining: the CBN’s foreign exchange reforms are clearly yielding results. One of the most notable successes has been the reduction in exchange rate volatility. Although the naira has depreciated, it has done so in a more orderly and predictable manner,” he said.

He further said that the gap between the official and the parallel market rates remains narrow, a significant departure from the sharp discrepancies seen in previous years.

“As Nigeria continues to rein in this volatility, it enhances its attractiveness as a destination for foreign capital. Should these reforms persist and deepen, they may lay the groundwork for a more sustainable and investment-friendly FX environment, potentially setting the stage for renewed inflows and a more stable naira in the long run,” he added.

Naira is undervalued

Cardoso has maintained that the naira is undervalued.

“We believe that the naira is currently undervalued,” Cardoso said early last year. “And coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” he added, as Bloomberg reported.

Tilewa Adebajo, CEO of CFG Advisory, argued that based on the country’s current economic fundamentals, the local currency should be trading well below N1,000 to the dollar.

In a detailed analysis entitled, ‘Shouldn’t the Naira Be Trading Below 1,000/$?’, Adebajo pointed to improvements in several key areas of the economy which justify a stronger naira.

He identified three major factors contributing to this perspective: the emergence of a more transparent FX market, enhanced external reserves, and increased oil production. He also underscored the narrowing gap between the official and parallel FX markets, which he attributed to structural reforms introduced in the last two years.

“The spread between the official and parallel FX rates has narrowed from over 50 percent in 2022 to under five percent in 2025,” Adebajo noted.

He credited this achievement to the adoption of a Bloomberg-driven bid and offer platform, which has improved transparency and price discovery in the FX market.

“This is my first visit. As for how much I plan to mobilize, I’ll share the figures later, but it will be in the multi-billion-dollar range involving my investors, partners, and associates,” said Vietnam-based Allen Le Nam, chairman of Allen Le & Partners, who pledged last week to invest alongside other investors in Nigeria’s aviation sector.