Naira Weakens by 3% in Q1 2025: Key Insights

Q1 2025: Naira Experiences 3% Devaluation

​In the first quarter of 2025, the Nigerian naira experienced significant depreciation, weakening by approximately 3% against the U.S. dollar. This decline was influenced by several factors, including global economic pressures and domestic policy changes.​

Key Factors Contributing to Naira Depreciation:

• Global Trade Tensions: The trade policies implemented by the U.S. administration, particularly the announcement of new tariffs, led to global market disruptions. These measures resulted in a decline in crude oil prices, adversely affecting Nigeria’s foreign exchange earnings, which are heavily reliant on oil exports. In response, the Central Bank of Nigeria (CBN) intervened by selling nearly $200 million to stabilize the naira.
• Reduced Dollar Supply: Currency dealers reported a significant decrease in dollar supply, attributed to banks halting sales to Bureau De Change operators. This scarcity intensified demand in the parallel market, contributing to the naira’s depreciation.
• CBN Policies: The CBN’s unification of exchange rates and adjustments to the naira’s value led to increased costs for businesses. Companies like MTN Nigeria reported substantial losses due to currency devaluation and foreign exchange challenges.

Impact on the Economy:

The naira’s depreciation has had widespread economic implications, affecting both businesses and consumers. Companies faced increased operational costs, leading to financial losses. For instance, MTN Nigeria reported a loss after tax of N400.44 billion for the financial year ending December 31, 2024, primarily due to currency devaluation and forex challenges.

Outlook:

As of April 2025, the naira continues to face pressure from both domestic and international factors. The CBN’s interventions aim to stabilize the currency, but challenges persist due to global economic uncertainties and internal policy adjustments. Ongoing efforts to diversify the economy and reduce dependency on oil exports are crucial for achieving long-term currency stability.