The Nigerian naira began 2025 with a slight depreciation, closing at N1,541.36/$ on the first trading day of the year. This marks a 0.36% drop compared to its closing rate of N1,535.82/$ at the end of 2024, according to data from the Central Bank of Nigeria’s (CBN) Nigerian Foreign Exchange Market (NFEM).
In the interbank market, some authorized dealers quoted the dollar at N1,545/$, reflecting a mild improvement from the N1,550/$ recorded on Tuesday. Others quoted the naira as low as N1,520/$ by the close of trading on Thursday.
In the parallel market, where the naira trades unofficially, it ended at N1,655/$, showing a slight appreciation compared to N1,670/$ on Tuesday.
Significant Depreciation in 2024
The naira’s performance in 2024 underscored a year of significant depreciation. The currency fell by 40.9% over the year, closing at an official rate of N1,535.82/$, a sharp decline from N907.11/$ at the end of 2023.
The depreciation occurred despite various foreign exchange reforms implemented by the CBN to improve market transparency and attract foreign investments.
Impact of CBN’s Reforms
The CBN’s introduction of the Electronic Foreign Exchange Matching System (EFEMS) in December was one of the central bank’s recent efforts to stabilize the currency. This system introduced new guidelines for authorized foreign exchange dealers, providing a platform for more transparent and efficient trading. While the naira initially gained some stability after EFEMS was introduced, sustained challenges in the forex market continue to pressure the currency.
Developments in the Money Market
Meanwhile, the Nigerian Interbank Offered Rate (NIBOR) reflected liquidity in the banking sector with downward movements across all maturities. The Open Repo Rate dropped by 0.61%, settling at 26.69%, while the Overnight Lending Rate decreased by 0.55% to 27.25%.
Outlook for 2025
As Nigeria enters the new year, market watchers are keenly observing how the naira will perform amidst ongoing economic pressures and the CBN’s forex reforms. The gradual improvements in liquidity and transparent trading systems offer some hope for a more stable currency, though challenges remain in managing depreciation and attracting sustained foreign investment.
