Exchange Rate Hits Seven-Month High, Appreciates by N63.

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Nigeria’s exchange rate saw a significant boost in January 2025, with the naira gaining N63.72 against the dollar to close at N1,474.78 per dollar on January 31 at the Nigerian Foreign Exchange Market. This 4.14% increase pushed the local currency to its highest level in seven months, with the last similar rate recorded on June 11, 2024 ¹.

The sharp increase is attributed to policies implemented by the Central Bank of Nigeria (CBN), which have influenced market dynamics and contributed to the currency’s strengthening. Authorized currency dealers quoted the dollar as high as N1,495.01/$ and as low as N1,447.50/$ at the NFEM.

The naira opened the year at N1,538.50/$ on January 2, 2025, and steadily gained value throughout the month. It experienced a slight dip to N1,535.00 on January 3 but continued to fluctuate, reaching N1,560/$ on January 16. The currency then embarked on a sustained appreciation from the third week of January, closing at N1,474.78/$ on January 31.

The introduction of the Electronic Foreign Exchange Matching System in December 2024 and the Nigeria Foreign Exchange Code on January 28, 2025, have played significant roles in the naira’s appreciation. The FX Code establishes principles for ethical conduct, governance, execution, information sharing, risk management, and settlement processes among market participants.

CBN Governor Olayemi Cardoso stated, “The FX Code marks a new era of compliance and accountability. It is not just a set of recommendations; this is an enforceable framework. Under CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”

Despite the naira’s appreciation, Nigeria’s foreign exchange reserves declined by $1.11 billion in January 2025, dropping from $40.88 billion on January 2 to $39.77 billion on January 30. This decrease suggests that the CBN may have deployed part of its FX stockpile to stabilize the local currency and manage liquidity in the official market.

At the start of January, reserves remained above the $40 billion mark, recording $40.88 billion on January 2 and fluctuating within that range for the first half of the month. By January 10, reserves stood at $40.75 billion, and they peaked at $40.96 billion on January 6 before beginning a gradual decline.

By mid-month, reserves had dropped to $40.42 billion on January 15, further sliding to $40.05 billion by January 22. The steepest declines occurred in the last week of January when reserves fell below $40 billion for the first time in months, hitting $39.99 billion on January 23 and $39.77 billion by January 30.

With the FX reserves at a three-month low, the consistent drawdown indicates heightened FX demand and possible interventions by the monetary authorities to maintain exchange rate stability. The current decline is similar to the significant drop recorded in April 2024, when reserves plunged by $2.16 billion within 29 days.

At the time, Cardoso attributed the decline to debt servicing and other financial obligations rather than interventions to stabilize the naira.

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