Oladele Oduniyi
Nigeria’s external reserves dipped to $38.045 billion as the Central Bank of Nigeria (CBN) intensified efforts to stabilise the naira, deploying a total of $580 million in foreign exchange (FX) sales during May 2025. This robust intervention strengthened the local currency but has reignited concerns about the sustainability of such support and its implications for the country’s reserve buffers.
To contain the pressure on the naira amidst a surge in corporate demand for U.S. dollars to settle international transactions, the CBN continued to pump FX into the market via authorised dealer banks. These injections helped fortify the supply side, ensuring sufficient liquidity in the market. According to a recent macroeconomic note by AIICO Capital Limited, the naira maintained a relatively steady trajectory in May, supported by consistent FX inflows and monetary support.
Earlier in May, the weakening of global crude oil prices and heightened demand for dollars drove the USD/NGN exchange rate to intraday highs of ₦1,614. However, with over $580 million injected into the market by the CBN across multiple sessions, the currency found some footing. Additional inflows from exporters and renewed interest from foreign portfolio investors further bolstered FX availability, helping the naira recover periodically.
This trend was also underpinned by growing investor confidence, partly fuelled by a positive sovereign credit rating from Moody’s Investors Service. The agency upgraded Nigeria’s credit standing from Caa1 to B3, maintaining a stable outlook. This marked the second upgrade under President Bola Tinubu’s administration and reflected improved macroeconomic fundamentals.
Moody’s cited key reforms—such as the discontinuation of fuel subsidies, a more flexible FX regime, and enhanced revenue collection—as catalysts for the improved rating. It also elevated Nigeria’s local currency ceiling to Ba3 and its foreign currency ceiling to B2, noting progress in rebuilding FX reserves and reducing fiscal risks.
Throughout May, the naira traded within a range of ₦1,575 to ₦1,610 to the U.S. dollar, AIICO Capital reported. Fixing rates fluctuated within this bracket as market dynamics shifted. By the end of the month, the naira appreciated by 66 basis points on a monthly basis, settling at ₦1,586.15/USD. In contrast, the parallel market saw mild depreciation, with the exchange rate weakening by ₦11 to ₦1,617.50/USD due to persistent street-level demand for dollars.
Despite periodic surges in demand, analysts noted that overall confidence in the FX market has improved. Liquidity remains strong, and the naira has shown resilience, aided by improved capital flows and tighter monetary controls.
Another key development in Nigeria’s fiscal landscape was the full settlement of its debt to the International Monetary Fund (IMF). The debt, which stood at $3.54 billion in December 2020, was completely cleared by May 2025. This exit from the list of debtor nations is seen as a landmark achievement in fiscal management and a major step toward restoring international investor confidence.