In the first quarter of 2025, the Central Bank of Nigeria (CBN) committed approximately $669 million to foreign exchange interventions in a concerted effort to stabilize the naira amidst increasing volatility. This strategic move, reported by investment firm AIICO Capital Limited, saw the CBN engage in dollar sales amounting to $668.8 million, a response to both dwindling dollar inflows and escalating offshore demand for foreign currency.
Despite these significant interventions, the naira has struggled against mounting pressures. In March alone, the currency depreciated by 2.97%, falling from ₦1,492.49/$ to ₦1,536.82/$. The month began with the exchange rate at ₦1,510/$, but heightened demand especially from foreign portfolio investors and local corporations, continued to intensify market strain. The parallel market echoed this sentiment, showing a similar decline as the naira weakened by ₦43.50 to end the month at ₦1,536.00/$.
To further mitigate pressures in the parallel market, the CBN implemented measures directing Bureau de Change operators to acquire $25,000 from authorized dealer banks at the official exchange rate. However, these measures were not enough to counter the ongoing challenges. By the quarter's close, Nigeria’s external reserves had dipped to $38.31 billion, a significant reduction from a three-year high of $43 billion, primarily attributed to debt service obligations and continuous dollar sales.
The AIICO report indicated that while mid-month liquidity saw temporary support from the CBN's dollar injections, it fell short of addressing the persistent demand in the Nigerian Foreign Exchange Market. As a result, despite the central bank's interventions, the naira continued to face pressure, showcasing only minor gains that were quickly overshadowed by market realities.
This volatility occurs in a broader context of global economic uncertainty. With President Donald Trump’s sweeping tariffs sending shockwaves through international markets, investor anxiety has increased, affecting emerging market currencies like the naira. As stocks experienced declines and market concerns escalated, the challenges for the naira have only intensified.
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