Nigeria’s naira ended 2025 on a high, recording its first annual appreciation in more than a decade, driven by foreign exchange market reforms and tighter monetary policy, official data from the Central Bank of Nigeria (CBN) showed.
The naira closed the year at 1,429 per U.S. dollar on December 31, representing a 7.4 percentgain over the year. This marks the first yearly increase since 2012, following thirteen consecutive years of depreciation caused by chronic foreign exchange shortages, high import dependence, and persistent market imbalances.
The currency’s recovery was uneven. The first half of 2025 was turbulent, with high inflation, strong demand for foreign currency, and delayed capital inflows pushing the naira to a low of around 1,602 per dollar in April. A gradual rebound began in May and gained momentum in the final quarter, with September marking a turning point as the currency settled below the 1,500-per-dollar threshold. After a brief consolidation in November, the naira strengthened further in December, ending the year at its highest level in twelve months.
Analysts attribute the turnaround to a series of measures introduced by the CBN under Governor Yemi Cardoso. Reforms launched in 2024 narrowed the gap between official and parallel market rates to under 5 percent, reducing speculation and improving price transparency. The central bank also tightened monetary policy, reinforced regulatory oversight, and in early 2025 introduced a foreign exchange conduct code to guide market participants.
“The reforms have restored confidence in the naira and brought greater predictability to the foreign exchange market,” said a Lagos-based currency analyst. “The challenge now is ensuring these gains are sustainable amid inflationary pressures and volatile capital flows.”
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Looking ahead, analysts caution that the durability of the naira’s recovery will depend on Nigeria’s ability to control inflation, maintain consistent foreign inflows, and diversify sources of foreign currency. The CBN projects average inflation to fall sharply to 12.94 percent in 2026, down from an estimated 21.3 percent in 2025, supported by stabilizing food and fuel prices, improved exchange rate management, and ongoing monetary and structural reforms.
Economic growth is also expected to accelerate. Gross domestic product (GDP) is forecast to expand by roughly 4.49 percent in 2026, underpinned by stronger fiscal management, a recovering manufacturing sector, and higher investment flows. However, analysts note that continued reform momentum is crucial; without it, the naira could remain exposed to renewed volatility, particularly if global oil prices fluctuate or domestic fiscal pressures intensify.
The CBN’s strategy highlights a broader effort to modernize Nigeria’s foreign exchange framework. By narrowing the gap between official and parallel rates, the central bank has reduced arbitrage opportunities and speculative trading, while encouraging transparency and efficiency.
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Investors have welcomed the stabilization, with local and foreign participants showing renewed interest in the bond and equity markets. The improvements in the FX market have also supported Nigeria’s wider economic agenda, including rising capital market activity, easing cost pressures on imports, and strengthening confidence in domestic policy credibility.
Despite the positive trend, caution remains. Analysts warn that inflationary pressures, currency misalignment, and external shocks could still test the naira’s resilience. The 2026 outlook will depend on disciplined macroeconomic management, continued FX reforms, and the government’s ability to sustain capital inflows and build foreign reserves.
For now, the 2025 gains mark a symbolic turnaround for the naira, ending more than a decade of annual declines and offering cautious optimism for Nigeria’s currency stability and broader economic prospects.
