The Central Bank of Nigeria (CBN) intensified its efforts to stabilize the naira in May 2025, injecting a total of $580 million into the foreign exchange (FX) market amid rising corporate demand for U.S. dollars and declining oil prices. The intervention helped steady the local currency but raised fresh concerns about the long-term sustainability of such measures as Nigeria’s external reserves slipped to $38.045 billion.
Throughout May, the CBN sold dollars through authorized dealer banks to cushion the naira from mounting pressure, largely driven by importers and businesses seeking to meet international obligations. According to a recent macroeconomic note by AIICO Capital Limited, the central bank’s aggressive interventions, alongside FX inflows from other sources, helped maintain relative currency stability during the month.
The naira, which had weakened to an intraday high of ₦1,614/USD earlier in the month, rebounded following multiple CBN interventions. By month-end, it closed at ₦1,586.15/USD, reflecting a modest appreciation of 66 basis points compared to April. However, the parallel market remained under pressure, with the naira depreciating by ₦11 to ₦1,617.50/USD due to continued demand for dollars outside official channels.
FX liquidity was further bolstered by inflows from exporters and renewed interest from foreign portfolio investors, contributing to the naira’s resilience. Analysts noted that market confidence improved on the back of consistent supply and tighter monetary policies.
Adding to the optimism was Nigeria’s credit rating upgrade by Moody’s Investors Service. The agency raised Nigeria’s sovereign rating from Caa1 to B3 with a stable outlook—marking the second such upgrade under President Bola Tinubu’s administration. The move was attributed to a raft of fiscal and structural reforms, including the removal of fuel subsidies, exchange rate unification, and stronger revenue generation.
Moody’s also lifted Nigeria’s local currency ceiling to Ba3 and its foreign currency ceiling to B2, citing ongoing progress in rebuilding FX reserves and reducing fiscal vulnerabilities.
During the month, the official exchange rate fluctuated between ₦1,575 and ₦1,610/USD, reflecting the impact of market dynamics and central bank activity. Despite sporadic surges in dollar demand, analysts say overall sentiment in the FX market is improving.
“Investor confidence is gradually returning, and with a more flexible exchange regime, the naira has shown signs of greater resilience,” AIICO Capital noted.
In another major fiscal milestone, Nigeria completed repayment of its $3.54 billion debt to the International Monetary Fund (IMF), which was acquired in December 2020 to cushion the impact of the COVID-19 pandemic. By May 2025, the debt was fully cleared, signaling improved debt management and further boosting investor confidence in Nigeria’s fiscal credibility.
While the CBN’s actions have yielded short-term gains in exchange rate stability, economists continue to caution that relying heavily on reserve drawdowns to defend the naira may not be sustainable in the long run. They emphasize the need for structural reforms, including boosting exports and attracting long-term foreign capital, to ensure enduring FX stability.
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