The Central Bank of Nigeria (CBN) made its first major foreign exchange intervention of 2025 on Friday, injecting $197.71 million into the official market to curb pressure on the naira.Â
This move comes as Nigeria’s currency faces renewed volatility triggered by geopolitical tensions, including fresh U.S. trade tariffs and weakening global oil prices.
The intervention follows a steep depreciation of the naira in just three days. According to data from the CBN, the naira fell by N35.77 at the official Nigerian Foreign Exchange Market (NFEM) between April 2 and April 4, 2025, dropping from N1,531.25 to N1,567.02 per U.S. dollar. The pressure was also evident in the parallel market, where the naira declined by N15, closing at N1,565 per dollar.
Why the CBN Is Acting Now
This $197.71 million FX injection is the CBN’s first official intervention of the year and is seen by analysts as a signal that more actions could follow if market instability persists. Omolara Omotunde Duke, the CBN’s Director of Financial Markets, released a statement describing the intervention as a “measured step” aimed at increasing liquidity and maintaining orderly conditions in the FX market.
The apex bank acknowledged that the naira’s recent fluctuations are not entirely domestic but part of broader global macroeconomic shocks. Chief among them is the fallout from President Donald Trump’s latest round of U.S. tariffs, which have disrupted international trade flows and triggered risk aversion among global investors. The resulting impact on oil prices – Nigeria’s primary export – has been particularly damaging.
Oil Prices Slide, Straining Nigeria’s FX Reserves
Oil prices, a cornerstone of Nigeria’s revenue and foreign exchange earnings, have taken a significant hit. Brent crude dropped 3.2% to $72.52 per barrel, while U.S. West Texas Intermediate (WTI) dipped below $70. Nigeria’s Bonny Light also slid more than 12%, falling to approximately $65.50 per barrel. These declines reduce Nigeria’s ability to earn and accumulate foreign reserves, adding more strain to the naira.
CBN data shows that Nigeria’s external reserves declined slightly by 0.3% to $38.17 billion as of April 2, 2025, from $38.30 billion on March 28. Analysts warn that further depletion is likely if global and local market dynamics remain unchanged.
Tariffs and Domestic FX Demand Fuel Pressure
Adding to the currency’s woes is a spike in foreign exchange demand, exacerbated by the suspension of the government’s Naira-for-Crude policy. The initiative, introduced on October 1, 2024, allowed domestic refineries like the Dangote Refinery to buy crude oil in naira rather than dollars. It aimed to ease dollar demand and strengthen local production capacity. However, the six-month pilot program ended on March 31, and uncertainty about its renewal has prompted fuel importers and refineries to re-enter the dollar market, intensifying demand.
Afrinvest Securities, in a market note, cited the suspension of this policy as a major reason for the surge in FX demand. The firm also pointed to the ripple effects of Trump’s tariff hike as a key trigger for Thursday’s sharp depreciation in the naira.
What Lies Ahead?
Market analysts expect that unless a significant upside catalyst emerges—such as a sudden surge in oil prices or a large foreign capital inflow—near-term pressure on the naira is likely to persist. Afrinvest highlighted potential geopolitical developments, including tensions in the Middle East and new tariffs on Venezuelan crude, which could influence global oil supply and prices.
Still, analysts caution that even a modest rebound in oil prices might not be enough to fully stabilize the naira, given Nigeria’s underlying structural challenges, such as low export diversification, heavy import reliance, and constrained FX reserves.
The CBN’s dollar sale signals a return to active intervention as it navigates a challenging mix of domestic FX pressures and international economic uncertainty. With global trade friction rising and oil prices slipping, the path ahead for the naira remains uncertain. All eyes will be on whether the central bank’s actions can steady the market or if further measures will be needed to shield the currency from deeper shocks.
