Nigeria Economic Update, Issue 1

According to the Central Bank of Nigeria (CBN), the Naira appreciated by 7.62 percent from ₦1661.12 to a US Dollar on 2nd December 2024 to ₦1534.56 to a US Dollar on 3rd January 2025. Since the unification of exchange rates in June 2023, the Naira has been fluctuating. In 2024, the local currency lost about 41 percent of its value against the dollar in the official market, despite a rise in external reserves in the same period. The recent appreciation of the Naira comes a month after the implementation of the Electronic Foreign Exchange Matching System (EFEMS), which was officially launched on 2nd December 2024 to reduce speculation and enhance transparency in Nigeria’s foreign exchange market. With a strengthened domestic currency, it is expected that prices would fall in the short term, especially given that Nigeria is a highly import-dependent country. If the appreciation is sustained over time, it enables the country to concurrently service foreign currency-denominated debts and supply demanded liquidity in the foreign exchange market. To ensure a stable and strong Naira, there is a need to maintain sustainable debt levels, reduce reliance on imports, and boost foreign reserves by increasing exports. Also, there is a need to create a business-friendly climate for foreign investors to attract foreign exchange inflow.

Download PDF