The Nigerian Naira witnessed a sharp depreciation against the U.S. dollar at the official foreign exchange market between March 14 and March 21, 2025, reflecting ongoing volatility in the country’s currency market.
According to data from the Central Bank of Nigeria (CBN), the Naira lost N18.96 within the week, a significant decline that further highlights the challenges facing Nigeria’s economy. On Friday, March 21, the Naira was valued at N1,536.89 per dollar, down from the N1,517.93 recorded the previous week.
Black Market Trends: A Surprising Gain
Interestingly, while the official market recorded a depreciation, the parallel (black) market saw a slight improvement in the Naira’s value. Data from currency traders revealed that the Naira appreciated by N10 in the black market, closing at N1,580 per dollar on Friday, compared to N1,590 the previous week.
This contrasting movement between the official and unofficial exchange rates indicates the ongoing instability in Nigeria’s currency market, as demand and supply dynamics continue to play out in different trading segments.
Fluctuations Continue Amid Economic Uncertainty
The latest figures underscore the continued volatility of the Naira against major currencies, as both official and parallel markets experience fluctuations driven by various economic factors. Experts attribute the sharp depreciation in the official market to a mix of dollar scarcity, declining foreign reserves, and policy uncertainties.
Speaking on the development, financial analyst Dr. Olumide Adekunle noted that the widening gap between the official and black market rates remains a key concern for Nigeria’s monetary authorities.
“The fluctuations in both markets highlight the uncertainty surrounding Nigeria’s forex policies. The CBN’s interventions have not yielded the expected results, and the scarcity of foreign exchange remains a major challenge,” he explained.
Impact on Businesses and Consumers
The depreciation of the Naira has far-reaching consequences, particularly for businesses that rely on imported goods and services. The rising cost of dollars means that importers have to spend more to bring in foreign products, ultimately leading to higher prices for consumers.
For businesses operating in sectors such as manufacturing, pharmaceuticals, and technology, the unstable exchange rate poses a significant challenge. Many companies are forced to adjust their pricing strategies, with some reducing production due to the high cost of raw materials sourced from abroad.
A Lagos-based importer, Mr. Paul Eze, shared his concerns about the impact of the weakening Naira:
“We are struggling to keep up with the rising costs. Every week, the price of importing goods increases, and we have no choice but to pass the cost onto customers. The government needs to stabilize the foreign exchange market before more businesses collapse.”
CBN’s Measures and Policy Adjustments
In response to the persistent currency depreciation, the Central Bank of Nigeria (CBN) has been implementing several measures aimed at stabilizing the Naira. These include:
- Intervention in the Forex Market – The CBN has periodically injected dollars into the market to curb excess demand and support the Naira. However, analysts argue that these interventions have had only a temporary effect.
- Foreign Exchange Reforms – The central bank has introduced policy changes to streamline forex access, particularly for businesses and manufacturers.
- Encouraging Remittances – The government has also encouraged Nigerians in the diaspora to send more foreign currency back home, as remittances play a vital role in strengthening forex reserves.
Despite these efforts, financial experts believe that a more comprehensive economic strategy is needed to address the underlying issues affecting the Naira.
Global and Domestic Factors Driving Depreciation
Several domestic and global factors have contributed to the Naira’s depreciation. On the international front, the strength of the U.S. dollar against other currencies has made it even harder for the Naira to maintain stability. With the U.S. Federal Reserve maintaining high-interest rates, global investors continue to favor dollar-based assets, leading to reduced foreign investment in Nigeria.
Domestically, the challenges facing the Naira include:
- Falling Foreign Reserves – Nigeria’s foreign exchange reserves have been declining due to lower oil revenues and increased capital flight.
- High Inflation – Inflationary pressures have weakened consumer purchasing power and contributed to the declining value of the Naira.
- Forex Demand-Supply Imbalance – The demand for dollars in Nigeria outweighs the available supply, putting pressure on the exchange rate.
Economist Dr. Adebayo Akintola emphasized the need for a long-term approach to stabilizing the currency:
“The government must focus on boosting production, attracting foreign investment, and reducing dependence on imports. Only a strong and diversified economy can support a stable currency.”
The Way Forward: What to Expect in the Coming Weeks
Looking ahead, market analysts predict that the Naira will continue to experience fluctuations unless concrete economic reforms are put in place. The CBN is expected to introduce additional forex policies, while the federal government works on attracting foreign direct investment (FDI) to strengthen the economy.
Meanwhile, businesses and individuals are advised to adopt strategic financial planning to navigate the current economic landscape. Currency traders expect that the black market may continue to see some level of appreciation if foreign inflows increase, but the official rate will depend heavily on government actions.
Financial expert, Mrs. Sarah Ugwu, advised businesses to adopt hedging strategies to minimize forex losses:
“Companies dealing with international transactions should explore forward contracts and other financial instruments to cushion the impact of currency volatility. Proper planning is crucial in times like this.”
Conclusion: A Call for Stability
The recent Naira depreciation against the dollar underscores the pressing need for a comprehensive economic strategy to stabilize Nigeria’s currency and restore investor confidence. While short-term interventions may offer some relief, long-term solutions such as diversifying the economy, improving forex management, and attracting investment will be key to achieving sustainable currency stability.
As Nigerians continue to navigate the challenges of a fluctuating exchange rate, all eyes remain on the CBN and federal government to implement decisive policies that will drive economic growth and strengthen the Naira in the months ahead.
