The naira-dollar exchange rate is predicted to maintain its newfound stability in 2025, thanks to a mix of regulatory reforms, forex market interventions, and strategic economic policies.
Muda Yusuf, Director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), delivered this optimistic forecast during an economic review of 2024. Highlighting key achievements and future projections, Yusuf pointed to decisive actions by the Central Bank of Nigeria (CBN) and strategic economic shifts that have fortified the naira’s resilience.
2024: A Year of Recovery
According to Yusuf, 2024 marked a turning point for the naira after enduring turbulent fluctuations in previous years. From January’s exchange rate average of N1,455.59, the naira saw a gradual adjustment, reaching N1,537 by December at the Nigerian Foreign Exchange Market (NFEM).
“Regulatory reforms and periodic CBN interventions played a pivotal role in reducing volatility,” Yusuf noted. He added that this stability was not accidental but the result of deliberate actions aimed at bolstering Nigeria’s economic fundamentals.
What’s Behind the Stability?
Several factors contributed to the naira’s recovery and are expected to ensure its stability in 2025.
Stronger Foreign Reserves
Yusuf emphasized the role of Nigeria’s foreign reserves, which exceeded $40 billion by the end of 2024. He credited this milestone to increased inflows from International Money Transfer Operators (IMTOs) and robust diaspora remittances.
“These reserves provide the CBN with the capacity to manage forex demand effectively,” Yusuf explained. He also highlighted strategic funding sources, including $2 billion Eurobond proceeds and a $500 million domestic dollar bond, as well as the clearance of $7 billion in forex obligations by the CBN.
Refinery Revolution
The operational launch of the Dangote and Port Harcourt refineries emerged as a major game-changer. By reducing Nigeria’s dependence on imported fuel, these refineries have eased pressure on forex demand.
“The Dangote refinery alone is a transformative asset for the naira,” Yusuf stated. “It cuts down our reliance on external currency for fuel imports, which has been a significant drain on foreign reserves.”
Improved Non-Oil Exports
Yusuf also pointed to signs of recovery in Nigeria’s non-oil export sector. “A gradual uptick in non-oil exports will further support foreign exchange inflows, bolstering the naira’s stability,” he added.
Inflation Trends and Economic Impact
While inflation remains a concern, Yusuf projected a modest easing in 2025, offering further hope for economic recovery.
“Inflation reached a staggering 34.2 percent in November 2024, driven by high energy costs and exchange rate volatility,” Yusuf said. However, he anticipated a reversal of this trend, thanks to the stabilizing naira, easing energy costs, and potential global oil market recovery.
He also cited geopolitical factors, including Donald Trump’s return to the U.S. presidency, as potential influencers of global economic dynamics in 2025.
Still, Yusuf warned of persistent inflationary pressures. “Energy costs, transportation expenses, and insecurity in agricultural areas will continue to weigh heavily on prices,” he cautioned. Additionally, he pointed to climate change, flooding, and global supply chain disruptions as ongoing risks.
Reflecting on 2024, Yusuf described inflation’s devastating effects. “Rising costs of living worsened poverty levels, while businesses struggled with soaring operational expenses,” he noted. “Weak consumer purchasing power left many unable to pass on additional costs to consumers, further shrinking profit margins.”
This ripple effect extended to heightened risks of loan defaults and abandoned projects across various sectors.
A Path to Resilience
Despite these challenges, Yusuf remained optimistic about Nigeria’s economic prospects in 2025. He stressed the importance of sustaining reforms and strategic measures introduced in 2024, which laid the groundwork for stability.
“The combination of increased foreign reserves, reduced fuel import dependency, and gradual recovery in non-oil exports positions the naira for resilience in the coming year,” Yusuf asserted.
He also highlighted the need for government vigilance in addressing persistent challenges like insecurity and infrastructure deficits, which continue to impact Nigeria’s economic potential.
A Call for Strategic Continuity
As 2025 approaches, economic stakeholders are looking to build on the progress achieved in 2024. Yusuf’s insights serve as both a reminder of the hurdles ahead and a roadmap for leveraging existing strengths.
“Maintaining the current momentum is crucial,” Yusuf concluded. “The policies and interventions we’ve seen are just the beginning. Sustained effort and strategic investments will ensure the naira’s stability and drive broader economic recovery.”
With a cautiously optimistic outlook, the naira’s stability offers a glimmer of hope for Nigeria’s economic future amid a challenging global landscape.
