The Nigerian naira demonstrated resilience in February 2025, closing the month with an 8.5% gain on the parallel market, settling at N1,490 per dollar. On the official market, the currency ended at N1,500 per dollar, marking a slight 1.7% month-on-month decline. This performance comes amid efforts by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange market and clear a backlog of outstanding forex obligations.
According to the Afrinvest Monthly Market Report, Nigeria’s foreign reserves dipped by 3.2% month-on-month, standing at $38.46 billion as of February 29, 2025. Analysts attributed this decline to the CBN’s interventions in the forex market, particularly its payments toward settling the verified portion of the $7 billion forex backlog.
CBN’s Interventions Drive Naira Stability
The CBN’s continued supply of dollars to Bureau De Change (BDC) operators and Deposit Money Banks (DMBs) has been instrumental in supporting the naira’s stability. Analysts project that the naira will maintain its positive performance in March, provided there are no adverse market shocks.
In recent weeks, the naira has shown mild strength against the US dollar, hovering around the N1,500 band across both the official and parallel markets. This stability has been achieved despite challenges such as declining foreign reserves and weaker oil earnings, which have limited dollar inflows into the economy.
Oil Prices and Forex Reserves Under Pressure
The global oil market has also played a role in shaping Nigeria’s forex dynamics. Bonny Light crude, Nigeria’s oil benchmark, traded weakly in February, shedding $2.36 (3.2%) week-on-week to close at $75.88 per barrel as of February 29. This decline was driven by weakened global demand, which weighed on crude prices and reduced dollar inflows into Nigeria’s economy.
The sustained pressure on oil prices has directly impacted Nigeria’s foreign exchange reserves, which fell by $240 million (0.61%) week-on-week. This highlights the persistent forex liquidity challenges facing the country, even as the CBN works to stabilize the naira.
Market Performance and Outlook
At the official Investors’ and Exporters’ (I&E) window, the naira appreciated marginally by 93 kobo against the dollar, closing at N1,500.15 per dollar. Meanwhile, on the parallel market, the currency gained N5, settling at an average of N1,490 per dollar as demand pressure eased slightly.
Analysts at Cowry Asset Research anticipate that the CBN will intensify efforts to defend the naira in the coming weeks. These efforts may include tightening liquidity and enhancing forex supply mechanisms. If successful, these measures could help the naira gain further ground against the dollar.
Challenges to Naira Stability
Despite the recent gains, experts have warned of underlying challenges threatening the naira’s stability. These include Nigeria’s mounting debt burden, the sustained decline in foreign reserves, and high inflation rates. These factors could undermine the potential gains of ongoing forex reforms if not addressed effectively.
As the CBN continues its efforts to stabilize the forex market, stakeholders will be closely monitoring developments in the global oil market, domestic economic policies, and the central bank’s interventions. The naira’s performance in March will depend on the effectiveness of these measures and the absence of significant external shocks.
For now, the naira’s ability to hold below the N1,500 mark in February is a positive sign, reflecting the impact of the CBN’s interventions and the resilience of Nigeria’s forex market.
