The Nigerian naira made a significant comeback in February 2025, appreciating against the US dollar, British pound, and euro in the parallel market.
This marks a positive shift from its previous downward trend, offering some relief to businesses and traders.
By the end of February, the naira recorded notable gains across key foreign currencies. The naira strengthened against the US dollar to N1,540/$, up from N1,620/$, reflecting a 7.41% appreciation.
Also, the naira strengthened against the British pound and improved to N1,910/£ from N2,000/£, marking a 4.50% increase, while it appreciated against the euro by rising to N1,550/€, compared to N1,660/€, showing a 6.34% gain.
This uptrend marks the strongest level for the naira since the beginning of 2025, indicating a short-term recovery in the foreign exchange market.
Official market performance
The official exchange rate followed a similar trend, stabilizing slightly above N1,500/$ in the weeks leading up to February’s close. According to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira settled at N1,496/$1 in the official market at the end of February.
This stability comes amid efforts by the Central Bank of Nigeria (CBN) to bridge the gap between the official and parallel market rates, ensuring a more transparent forex system.
As of February 28, 2025, the Nigerian Naira (NGN) is trading at approximately ₦1,500 per US dollar in both the official and parallel markets. This convergence indicates a unified exchange rate market
Market trends
Since the beginning of 2025, the naira has been trading above N1,600/$ in the parallel market. However, in February, the currency strengthened, hitting a yearly low of N1,480/$ on February 26, before settling around N1,500/$ by month-end.
- This represents a 9.91% appreciation from N1,665/$1 recorded on January 1, 2025.
- The British pound and euro followed similar trends, with the naira gaining 10% against the pound and 9.6% against the euro since the start of the year. Market reports also indicated that on February 27, the naira hit an all-time low of N1,900/£1 before rebounding.
- Despite this strengthening, analysts caution that the appreciation may be short-lived, with potential market fluctuations expected in March.
What you should know
In response to the forex volatility, the CBN has extended its weekly forex sales of $25,000 to Bureau de Change (BDC) operators until May 30, 2025. This move is aimed at increasing liquidity in the forex market and reducing the pressure on the naira.
- CBN introduced revised forex guidelines in December 2024, allowing licensed BDC operators to purchase forex directly from authorized dealers.
- At its Monetary Policy Committee (MPC) meeting on February 19-20, 2025, the CBN discussed strategies to stabilize the exchange rate and ensure better alignment between the official and parallel market rates.
- The CBN implemented the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code to enhance transparency, ethics, and credibility in forex transactions.
- The recent Consumer Price Index (CPI) rebasing by the National Bureau of Statistics (NBS) resulted in a statistical decline in the headline inflation rate, indirectly boosting confidence in the naira.
The MPC also emphasized the need for government efforts to improve food security and enhance supply chains, ensuring a more stable economic environment to support currency appreciation.
What’s next for the naira?
While February saw a significant appreciation, experts warn that this trend may be temporary, with possible depreciation expected in March.
The coming months will be crucial in determining whether the naira can maintain its momentum or face renewed pressure in the parallel market.
The sustainability of the naira’s strength will depend on:
- Continued CBN interventions in the forex market.
- Inflation trends and economic policies.
- External factors like global oil prices and dollar demand.
