On Thursday, May 23, 2025, the Nigerian naira weakened to N1,586/$1 in the official market, marking its first depreciation since the Central Bank of Nigeria’s (CBN) 300th Monetary Policy Committee (MPC) meeting earlier in the week. This dip, reported by the CBN’s official website, interrupted a three-day streak of appreciation during which the naira traded at N1,597/$1 on Monday, N1,588.5/$1 on Tuesday, and N1,583/$1 on Wednesday. The naira’s fluctuations, coupled with the CBN’s decision to maintain the Monetary Policy Rate (MPR) at 27.5%, have reignited discussions about Nigeria’s economic resilience amid global trade pressures, seasonal foreign exchange demands, and the push for localized production. As inflation eases and domestic initiatives like the Dangote Refinery gain traction, Nigerians are questioning whether high interest rates are stifling growth or safeguarding stability.
A Fragile Recovery: The Naira’s Recent Movements
The naira’s decline to N1,586/$1 in the official market reflects a delicate balance in Nigeria’s foreign exchange dynamics. Intra-day trading on Thursday saw the naira fluctuate between a high of N1,588.5/$1 and a low of N1,582/$1, with an average rate of N1,584.99/$1, according to CBN data. Against other major currencies, the naira showed mixed performance: it weakened slightly against the pound sterling to N2,127.96/£1 from N2,126.23/£1 the previous day, while it strengthened marginally against the euro, trading at N1,791.95/€1 compared to N1,795.07/€1.
In contrast, the parallel market painted a different picture. The naira appreciated to N1,620/$1 on Thursday, up from N1,625/$1 on Wednesday, maintaining a stronger position than the official market. Against the pound, the naira gained ground, closing at N2,135.00/£1, an improvement from N2,155.00/£1 on Wednesday. However, it slipped against the euro to N1,835/€1, down from N1,820/€1 earlier in the week. These divergent trends highlight the complex interplay between regulated and informal markets, with the parallel market often reflecting immediate demand pressures from retail traders and small businesses.
Analysts attribute the naira’s recent pressures to seasonal demand for foreign exchange, driven by affluent Nigerians purchasing dollars for international travel, school fees, and Hajj pilgrimage expenses. “The naira always faces pressure around this time of year,” says Chidi Okoro, a Lagos-based financial analyst. “But the CBN’s high MPR is making it harder for businesses to borrow and grow, which could weaken the naira further if local production doesn’t pick up.”
CBN’s Steady Hand: High MPR and Economic Strategy
The CBN’s decision to retain the MPR at 27.5%, announced during the MPC meeting in Abuja on May 20, 2025, underscores its commitment to stabilizing the naira and curbing inflation, which eased to 23.71% in April from 24.23% in March. The MPC also maintained the Asymmetric Corridor at +500/-100 basis points, the Cash Reserve Ratio at 50% for Deposit Money Banks and 16% for Merchant Banks, and the Liquidity Ratio at 30%. CBN Governor Olayemi Cardoso expressed optimism, noting that rising external reserves—now estimated at $23 billion, up from $3 billion in net usable assets—signal renewed investor confidence and the return of previously sidelined market participants.
Cardoso’s remarks highlight the CBN’s belief that its monetary policy reforms are bearing fruit. The naira’s stabilization within the N1,590/$1 to N1,610/$1 range in 2025, coupled with the decline in inflation, suggests progress. However, the high MPR continues to draw criticism from entrepreneurs and consumers who argue it restricts access to credit, stifling business growth and consumer spending. “The CBN is trying to control inflation, but the high interest rate is killing small businesses,” says Fatima Ibrahim, a retailer in Kano. “We need cheaper loans to compete with imported goods.”
The Dangote Refinery and Localized Production
The easing of inflation has been partly attributed to domestic initiatives like the Dangote Refinery, which has reduced Nigeria’s reliance on imported fuel. By producing refined petroleum products locally, the refinery has lowered transportation and logistics costs, contributing to the inflation drop. Additionally, global trade pressures, particularly tariffs imposed by the Trump administration, have increased the cost of imported goods, prompting a shift toward locally produced alternatives. From textiles to food products, markets in Lagos, Kano, and Abuja are seeing growing demand for Nigerian-made goods.
This shift has fueled calls for the CBN to lower the MPR to support local entrepreneurs. “If we’re serious about local production, the CBN needs to make borrowing more affordable,” says Tunde Adeyemi, a manufacturer in Ogun State. “The tariffs are forcing us to produce more locally, but without access to credit, we can’t scale up.” The high MPR, while effective in curbing inflation, risks undermining the potential of Nigeria’s burgeoning domestic industries, particularly as global trade dynamics push for self-reliance.
Global Pressures and the Naira’s Future
The Trump administration’s tariffs have amplified the cost of imported goods, inadvertently bolstering Nigeria’s case for localized production. However, the naira’s recent depreciation in the official market raises concerns about its ability to withstand external pressures. The seasonal demand for dollars, coupled with Nigeria’s historical reliance on imports, continues to strain foreign exchange reserves. While the CBN’s reforms have attracted investor confidence, as evidenced by the rise in external reserves, the naira’s volatility underscores the fragility of these gains.
Critics argue that the CBN’s high MPR may be an overcorrection, as noted by Dr. Ejime Herbert Aniemeke, who warned of the risks of stifling economic growth. The high interest rate environment limits borrowing for SMEs, which are critical to job creation and economic diversification. Meanwhile, the parallel market’s relative strength suggests that informal traders are adapting more quickly to demand pressures, but this also highlights the CBN’s challenge in aligning official and parallel market rates.
Voices from the Ground
For ordinary Nigerians, the naira’s fluctuations and high interest rates translate into tangible hardships. “Everything is expensive, and I can’t borrow to start a business because the banks charge too much,” says Chinedu Okeke, a driver in Port Harcourt. In markets across the country, consumers are turning to local products, but supply constraints and high production costs
