The Nigerian naira is teetering on the edge of another historic depreciation, with financial analysts predicting a value of ₦1,804.45 per dollar in 2025. This alarming forecast comes from Lagos-based investment and research firm, Afrinvest, which released its annual report titled “Beyond The Rhetorics: Transforming Reforms to Tangibles.”
Despite recent improvements in Nigeria’s gross foreign reserves, which now exceed $40 billion, Afrinvest cautioned that exchange rate volatility will persist, albeit at a less aggressive pace. “Our prognosis is hinged on the belief that the CBN [Central Bank of Nigeria] would be constrained from adequately meeting market demand on a sustained basis,” the report noted. It further highlighted that much of the reserves’ recent accretion stems from “inorganic sources, including those with stringent conditions on usability.”
A Grim Outlook for the Naira
Afrinvest’s projection starkly contrasts the federal government’s 2025 budget assumptions, which pegged the exchange rate at ₦1,400/$1. The local currency’s trajectory has been a rollercoaster, closing 2024 on a slightly stronger note at ₦1,534/$1 on December 27, up from ₦1,548.40/$1 earlier in the week, according to FMDQ Securities data.
The naira’s dramatic decline over the past year, however, remains a critical concern. Following a series of radical reforms initiated by the federal government—including the decision to float the currency and multiple devaluations—the naira lost over 40% of its value in 2024. At its lowest point in February, the naira traded near ₦2,000 to the dollar on the parallel market and hovered around ₦1,700 in the official window.
Root Causes of the Crisis
The naira’s woes are rooted in Nigeria’s structural economic challenges, including overreliance on crude oil exports, limited foreign direct investment, and a history of mismanaged monetary policies. Afrinvest analysts pointed out that the Central Bank’s inability to meet foreign exchange demands has exacerbated the situation, leaving businesses and individuals scrambling for dollars in the parallel market.
The FX BMatch platform, introduced in October 2024 to enhance transparency, has provided some relief, but experts argue that more robust interventions are needed to stabilize the naira. “The sustenance of EFEMS [Export Facilitation and Exchange Market Stabilization Scheme] and a more expansive net reserve could partly ease the pressure on the naira,” noted an economist familiar with the matter.
Hopes for Recovery?
Despite the grim predictions, Afrinvest did not entirely rule out the possibility of a naira rebound. The report emphasized the importance of organic inflows—such as revenues from crude oil exports, non-oil exports, foreign capital inflows, and diaspora remittances—in boosting Nigeria’s foreign exchange reserves. “Notwithstanding, we do not rule out the possibility of a significant rebound in the naira, especially if accretion from organic sources takes a significant leap,” Afrinvest stated.
Analysts are particularly optimistic about crude oil revenues, which remain a cornerstone of Nigeria’s economy. However, they warn that global oil price fluctuations and domestic production challenges could undermine these gains.
The Federal Government’s Role
As Nigeria grapples with its currency crisis, critics have called for greater accountability and consistency in monetary policies. The federal government’s 2025 budget projections, which some have described as overly optimistic, have drawn scrutiny from economists.
“The assumption of an exchange rate at ₦1,400 to the dollar is unrealistic given current market realities,” said a financial analyst who requested anonymity. “Without significant reforms to boost foreign exchange liquidity, the naira’s downward spiral is likely to continue.”
Additionally, questions have been raised about the Central Bank’s role in managing the crisis. Recent leadership changes at the apex bank have inspired cautious optimism, but skeptics argue that more concrete measures are needed to address systemic issues.
