2024 FX Recap
Nigeria’s foreign exchange market in 2024 faced notable challenges, with the Naira experiencing 40.9% depreciation against the US dollars in the official market and a 26.8% depreciation in the parallel market. The official exchange rate saw considerable volatility, starting the year at approximately N1,386.5/USD, while reaching an all-time high of N1660/USD in June and closing at around N1,535/USD.
Despite efforts by the Central Bank of Nigeria (CBN) to stabilize the currency, such as implementing rate unification, otherwise known as floating the Naira, and the Federal Government’s structural reforms, liquidity constraints remained a key driver of the Naira’s decline.
In December, the CBN launched the Electronic Foreign Exchange Matching System to improve transparency by automating how FX buyers and sellers are matched. This move had a noticeable impact on the market in the first few days after its launch.
2025 Outlook
The Nigerian government’s 2025 budget projects an exchange rate of ₦1,400 per US dollar, a more optimistic outlook compared to the year-end 2024 official rate. This projection suggests an anticipated appreciation or stabilization of the Naira. Key factors influencing this expectation include improved access to foreign exchange and the relaxation of currency controls, which could attract foreign investment. However, global economic conditions, particularly oil price fluctuations and the economic performance of major trading partners, will significantly impact the Naira’s trajectory.
While short-term volatility is expected due to ongoing economic adjustments and global market uncertainties, the government’s reforms and the projected exchange rate could foster a medium-term trend towards stabilization or appreciation, particularly within the official market.
Conclusion
As Nigeria navigates its complex foreign exchange landscape, 2025 presents an opportunity for recovery and growth. While challenges such as global market uncertainties and domestic economic adjustments persist, the government’s proactive reforms and policy measures signal a commitment to stabilizing the Naira. The projected exchange rate of ₦1,400 per US dollar reflects a cautiously optimistic outlook, contingent on the effective implementation of these reforms and favorable global economic conditions. By fostering transparency, improving liquidity, and attracting foreign investment, Nigeria’s foreign exchange market could enter a phase of relative stability, laying the groundwork for sustained economic resilience and growth.
Disclaimer: This analysis is based on current information and projections, which are subject to change.
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