Market News
Naira records N90 gain in black market H1 as dollar inflows surge
The naira recorded a gain of N90 or 5.7% in the black market and 0.8% in the official foreign exchange (FX) market in the first half of 2025, supported by rising dollar inflows largely driven by foreign portfolio investors.
Data from the Central Bank of Nigeria (CBN) showed that the naira appreciated by N11.65 in the official market, closing at N1,529.71 on June 30, 2025, the last trading day, compared to N1,541.36 quoted at the beginning of June.
In the parallel market, the naira strengthened from N1,660 per dollar at the start of June trading to N1,570 by the end of the month, representing a N90 gain or 5.7%. The improved exchange rate performance reflected a stronger inflow of foreign exchange and increased market confidence.
“The gradual appreciation of the naira and shrinking spread between official and parallel rates underscore improved confidence in the FX market. The CBN’s FX policies and its clear policy direction have reduced speculative demand, enhanced FX inflows, and weakened the incentive for rent-seeking and arbitrage,” analysts at FSDH Research said. They noted that the Central Bank has continued implementing reforms to enhance transparency and confidence in the FX market.
“We note that major risks to economic growth and FX stability include possible financial outflows and a lower crude oil price and output below the federal government’s benchmark. We maintain our earlier forecast that the naira will settle around N1,595 in 2025,” the analysts said.
Capital flows remain crucial for Nigeria’s balance of payments and currency stability. According to FSDH Research, Nigeria attracted $5.03 billion in Foreign Portfolio Investments (FPIs) in the first quarter of 2025, a development attributed to investor-friendly reforms and diversification of exports. The CBN’s most recent Quarterly Statistical Bulletin showed that total foreign exchange inflows into the Nigerian economy rose by 17% quarter-on-quarter and 78% year-on-year to $27.7 billion in Q4 2024.
Analysts at FBNQuest noted that FX inflows had trended upward since Q4 2023. The increase was largely due to a 38% growth in inflows from autonomous sources, which amounted to $16.1 billion and accounted for 58% of total FX inflows. Meanwhile, total FX outflows rose by 43% quarter-on-quarter to $12.1 billion, resulting in a net FX inflow of approximately $15.7 billion, the highest since Q3 2021.
Despite a slight decline of 4% quarter-on-quarter in FX inflows through the CBN to $11.5 billion, autonomous sources more than compensated with strong portfolio-driven inflows. The CBN’s FX outflows, however, increased by 39% to $10.1 billion, mainly due to external debt service payments and other financial obligations. Net FX inflow through the CBN stood at $1.4 billion during the period.
FX outflows from autonomous sources also increased to $1.9 billion from $1.1 billion in Q3 2024. Combined, net FX flows from autonomous sources rose by 34% quarter-on-quarter to $14.3 billion. FBNQuest expects these autonomous inflows to remain supported by favorable monetary policy in the near term, though global risks such as U.S. monetary policy shifts, changes in trade policy, and weakening external demand may weigh on future inflows.
According to FSDH, external reserves grew in 2024 due to key CBN reforms, including the clearing of FX backlogs, interest rate hikes, and tightened FX policy. Reserves climbed from a low of $32.1 billion in April 2024 to a peak of $40.9 billion in January 2025.
However, in the first half of 2025, reserves fell by 8.5% to $37.3 billion as of June 27, pressured by rising import bills, service payments, and debt servicing costs.
