The naira closed 2024 at an exchange rate of ₦1,535 to the US dollar, reflecting a sharp 40.9% depreciation compared to its position at the end of 2023. The currency’s steep decline underscores persistent challenges in stabilizing the forex market despite aggressive policy interventions by the Central Bank of Nigeria (CBN).
The year began with cautious optimism as the naira, which ended 2023 at ₦907.11/$1, showed signs of strength. By January 31, it had appreciated to ₦1,455.59/$1. However, this recovery was short-lived as the currency faced mounting pressure across both official and parallel markets.
Throughout the year, the CBN implemented sweeping reforms to address forex volatility. Governor Olayemi Cardoso highlighted early in 2024 that the naira was significantly undervalued and stressed the need for genuine price discovery.
One of the pivotal moves came in February when the CBN scrapped the ±2.5% cap on interbank foreign exchange transactions, signaling a shift toward a freer-floating exchange rate regime. Additionally, the Economic and Financial Crimes Commission (EFCC) intensified its clampdown on dollar hoarders and forex speculators to curb the naira’s slide.
March marked a critical moment with the revocation of licenses for 4,173 Bureau De Change (BDC) operators. The central bank argued that many of these operators were complicit in perpetuating illicit forex activities. Despite this, the naira recorded its best performance in five years, buoyed by policy enforcement and increased forex inflows.
While the official exchange rate ended the year at ₦1,535/$1, the parallel market painted a grimmer picture. By December, the naira traded for ₦1,660/$1, a 26.8% depreciation compared to the previous year’s ₦1,215/$1. This divergence between official and unofficial rates highlighted ongoing liquidity challenges in the forex market.
External reserves offered a glimmer of hope, increasing by 24% to $40.8 billion by December 30, 2024. This uptick followed efforts by the federal government and the CBN to attract foreign investments and boost remittance inflows.
Several high-profile interventions shaped the forex narrative in 2024. Notably, in March, the federal government fined cryptocurrency exchange Binance $10 billion for violations related to forex transactions. Observers described this as part of Nigeria’s broader crackdown on financial irregularities.
By mid-year, the CBN raised the capital requirement for BDC operators to ₦2 billion, sparking debates among financial stakeholders. Some praised the move as necessary to sanitize the sector, while others criticized it as overly restrictive.
Other notable reforms included the reintroduction of remittance inflow auctions and a domestic dollar bond issuance worth $500 million. These initiatives aimed to bolster forex liquidity but fell short of reversing the naira’s overall depreciation.
In November, a bold step was taken with the launch of a nine-month window allowing Nigerians to deposit undisclosed foreign currencies in banks. This was part of a larger strategy to improve forex inflows and discourage hoarding. Additionally, banks received approval to trade idle forex deposits, a move aimed at easing liquidity pressures.
Despite these efforts, the naira ended the year as one of Sub-Saharan Africa’s worst-performing currencies. Analysts attributed this to structural challenges in Nigeria’s forex market, including heavy reliance on oil exports, weak non-oil revenues, and persistent dollar demand outstripping supply.
Regional competitors like the Ghanaian cedi and South African rand fared better in relative terms, raising questions about Nigeria’s forex management strategy.
The CBN has hinted at further reforms in 2025, with Governor Cardoso outlining plans to introduce an FX matching system. This initiative aims to improve price discovery and stabilize the naira by aligning supply with demand more effectively.
“We are committed to implementing measures that address the root causes of the naira’s volatility,” Cardoso said during a December press briefing. “The goal is to create a market-driven system that reflects economic realities.”
However, economists caution that achieving lasting stability will require more than just regulatory tweaks. Structural reforms, including diversifying Nigeria’s export base and addressing fiscal deficits, remain critical to long-term success.
For many Nigerians, the naira’s depreciation has had tangible consequences, from rising import costs to inflationary pressures.
“Everything has become more expensive,” said Maryam Bello, a trader in Kano. “We used to buy goods from abroad, but now it’s almost impossible.”
Experts warn that without sustained efforts to address forex imbalances, the economic burden on ordinary Nigerians will only grow. As the country enters 2025, all eyes remain on the CBN and federal government to deliver on promises of stability and growth.