The naira’s struggle against the dollar intensified in March 2025, as it depreciated by 2.6% at both the Nigerian Autonomous Foreign Exchange Market (NAFEX) window and the parallel market, despite a substantial intervention by the Central Bank of Nigeria (CBN). The continued depreciation of the national currency reflects the mounting pressure on Nigeria’s foreign exchange market, fueled by a persistent demand for dollars and the impact of global economic shifts.
According to the latest Afrinvest Monthly Market Report titled ‘Analysing Global and Nigerian Economies & Financial Markets,’ the naira ended March 2025 trading at N1,536.82/$ at the NAFEX window and N1,530/$ in the parallel market, compared to the previous month’s rates. These figures marked a significant decline, despite the CBN’s intervention in the foreign exchange market with a dollar sale of approximately $668.8 million.
AIICO Capital’s March macroeconomic report also highlighted that the naira faced immense pressure due to an overwhelming demand for foreign currency. Both foreign portfolio investors and local corporates contributed to this heightened demand, especially for dollars, which led to the currency’s depreciation despite the CBN’s ongoing efforts to stabilize the market.
“The naira experienced significant depreciation in March 2025 due to persistent demand pressure in the foreign exchange market. Despite the Central Bank of Nigeria intervening with substantial dollar sales totaling $668.8 million, the naira weakened by 2.97% month-on-month,” stated AIICO Capital’s report.
Liquidity in the market improved mid-month thanks to the CBN’s interventions, but demand continued to outstrip supply. By the final week of March, although the CBN continued its dollar sales, the naira remained under pressure, experiencing only a slight appreciation of 0.5% for the week. On a quarterly basis, the naira depreciated by 7 basis points (bps) at the NAFEX window, while the country’s external reserves fell by $110 million, ending the month at $38.31 billion.
The naira’s decline in March was not just a result of local economic factors but also due to external forces, particularly the global macroeconomic shifts caused by the trade tariffs introduced by the United States under President Donald Trump. The CBN attributed part of the naira’s struggles to these global factors, stating that the tariffs have had a ripple effect on economies worldwide, and Nigeria, with its high import dependency, has been particularly vulnerable.
Omolara Duke, the Director of the CBN’s Financial Markets Department, emphasized that the Central Bank remains committed to maintaining adequate liquidity in the market, pointing out that the bank sold $197.71 million through authorized dealers between April 3 and 4, 2025. This intervention was intended to support the orderly functioning of the market and to ensure that the naira remains stable despite external shocks.
“The CBN continues to monitor global and domestic market conditions and remains confident in the resilience of Nigeria’s foreign exchange framework, which is designed to adjust appropriately to evolving fundamentals,” Duke said. Despite these measures, the CBN acknowledged that the current pressure on the naira might continue, especially with global uncertainties affecting investor confidence.
The pressure on the naira has had a noticeable effect on various sectors of Nigeria’s economy, particularly those dependent on imports. The rising cost of foreign currency has made it more expensive for businesses to source raw materials, machinery, and products from abroad. This, in turn, has led to inflationary pressures, as the prices of goods and services have risen due to the increased cost of imported items.
Analysts from Afrinvest noted that the stoppage of the naira-for-crude initiative, which previously allowed Nigeria to access dollars in exchange for crude oil, has only worsened the situation. With the end of this initiative, it is expected that the demand for foreign exchange will increase, particularly from refineries and importers of petroleum products. This could lead to further pressure on the naira in the near term.
“The end of the naira-for-crude initiative could cause FX demand to surge, particularly as refineries and petroleum importers seek more dollars. This will likely keep the naira under pressure in the near term unless there are major changes in the global or domestic economic environment,” said analysts at Afrinvest.
The rising demand for dollars has also contributed to the persistent volatility in the Nigerian Foreign Exchange Market, particularly in the interbank market. Early in the week, the naira remained relatively stable, trading between N1,525 and N1,535/$, thanks to the CBN’s support and moderate offshore inflows. However, by midweek, there was a sharp reversal, and the naira weakened to as much as N1,570/$ due to increased offshore demand and weakened oil prices.
The pressure on the naira is further compounded by global economic challenges, particularly the trade war between the United States and other countries, including China and the European Union. The imposition of tariffs by President Trump has created a ripple effect in global markets, with many countries, including Nigeria, facing increased costs for imports.
Former Zenith Bank Chief Economist, Marcel Okeke, warned that the global tariff war could trigger inflation worldwide, and Nigeria would be particularly vulnerable due to its heavy reliance on imports. He predicted that Nigeria might experience an uptick in imported inflation, which could put further strain on the naira.
“We’re likely to see an uptick in imported inflation, especially in Nigeria, where most goods are imported. The country will have to find ways to mitigate the impact of this global situation on its domestic economy,” Okeke said.
Despite the challenges, the CBN remains optimistic that the naira will stabilize in the near term. The bank’s interventions are expected to continue, as it aims to ensure adequate liquidity in the foreign exchange market. However, analysts at AIICO Capital and other investment houses caution that the continued pressure on the naira, compounded by global economic risks, could lead to further volatility in the months ahead.
“The outlook for the naira remains uncertain, with global risks such as US tariffs and the possibility of capital flight adding to the pressure on the currency. The CBN will likely continue its interventions to stabilize the market, but the underlying risks remain,” AIICO Capital noted in its report.
As Nigeria faces external pressures and ongoing demand for foreign exchange, the naira’s performance will depend on a variety of factors, including global economic conditions, domestic policies, and the effectiveness of the CBN’s interventions. For now, the currency’s future remains uncertain, and businesses and consumers alike will continue to feel the effects of the volatile foreign exchange market.
