Nigeria’s local currency, the naira, continued its descent against the U.S. dollar, closing at ₦1,602.02/$1 at the official window on Tuesday, April 29, 2025.
This movement signals ongoing weakness in the foreign exchange (FX) market, driven by persistent dollar scarcity, weak external reserves, and rising demand for foreign currency.
According to the Central Bank of Nigeria (CBN), the official exchange rate fell further from Monday’s close of ₦1,596/$1, confirming a steady decline that has characterized the naira’s performance in recent weeks. The intraday trading range spanned a high of ₦1,602.02 and a low of ₦1,596.70 per dollar, yielding an average exchange rate of approximately ₦ 1,600.04 per dollar for the day.
This downward trajectory marks a noticeable deviation from previous trading benchmarks, underscoring the mounting pressure on the currency, particularly due to a shortfall in foreign exchange supply from oil exports, remittances, and foreign investments. Additionally, speculative demand and arbitrage in the market continue to distort the balance between the official and parallel market rates.
Black Market Echoes the Dip
In the parallel (black) market—specifically Abuja’s Zone 4 currency exchange hub—the dollar traded as high as ₦1,610/$1, worsening from ₦1,605/$1 the day before. This growing disparity between official and unofficial rates further complicates market dynamics and deepens arbitrage risks, as demand far outpaces supply.
Dealers reported increased pressure from businesses, importers, and individuals seeking to source dollars for transactions abroad. With dollar availability dwindling, many turn to the black market to meet their needs, further driving depreciation.
Why the Naira is Weakening
Experts have identified multiple contributing factors behind the decline of the naira. Among the top issues are:
- Limited dollar inflows: Nigeria continues to struggle with weak oil revenue performance and sluggish remittance growth.
- Global monetary tightening: Rising interest rates in advanced economies have diverted capital away from emerging markets, such as Nigeria.
- FX policy uncertainty: Despite some reforms, such as exchange rate unification and efforts to clear the backlog, forex inflows remain inconsistent.
Speaking to Nairametrics, Abuja-based economist Bulus Anag emphasized that “without a consistent inflow from oil, diaspora remittances, or foreign investors, pressure on the naira is likely to persist.” Another analyst noted that until confidence is restored—potentially through Eurobond issuance, an oil price rebound, or external funding support—the market will remain volatile.
CBN Policy Shifts and Market Response
Building on recent developments, the CBN on Monday directed all banks to commence implementing the Pan-African Payment and Settlement System (PAPSS). This move enables individuals and businesses to process international payments within Africa using basic Know Your Customer (KYC) and Anti-Money Laundering (AML) documentation, with transaction thresholds set at $2,000 for individuals and $5,000 for corporations. This policy is expected to simplify cross-border transactions and enhance trade flow under the African Continental Free Trade Area (AfCFTA).
Additionally, in a move aimed at mopping up excess liquidity, the CBN raised ₦1.008 trillion at its recent Open Market Operations (OMO) auction, held on April 25, 2025, amid an oversubscription rate of 102%. This underscores investors’ growing appetite for naira-denominated instruments, even amid currency uncertainty.
Looking Ahead
With limited foreign exchange (FX) inflows and rising demand, traders anticipate that the naira may hover between ₦1,600 and ₦1,620 per dollar in the short term, unless a major policy intervention or significant foreign capital injection occurs. In the meantime, market participants remain cautious, waiting for signs of stability in Nigeria’s economic and monetary framework.
