In a landmark shift for Africa's largest economy, the Nigerian naira closed the 2025 financial year with its first annual appreciation in over a decade, breaking a persistent cycle of depreciation that began in 2013. Official data confirms the currency strengthened by 6.5 per cent against the US dollar over the course of the year.
A Turbulent Journey to a Historic Finish
The naira's path through 2025 was anything but smooth. The year began under significant pressure, with the currency hitting its weakest point in April at approximately ₦1,602 to the dollar. This slump was driven by familiar headwinds: high inflation, robust demand for foreign exchange, and delays in expected FX inflows.
However, a decisive turnaround began in May. The naira started a steady recovery, closing near ₦1,585 that month and strengthening further to about ₦1,532 by June. The momentum continued, with the currency breaking the psychologically important ₦1,500 barrier in September, settling around ₦1,478. The rally peaked in October when it touched roughly ₦1,427.5, before a slight easing in November. A final push in December saw the naira close the year at ₦1,435 per dollar, compared to ₦1,535 at the end of 2024.
CBN Reforms and Market Confidence: The Engine of Recovery
Financial analysts widely credit the currency's reversal to a series of strategic reforms implemented by the Central Bank of Nigeria (CBN). Key measures included the unification of multiple exchange-rate windows, enhanced transparency in FX operations, and the establishment of stronger price discovery mechanisms.
A critical outcome of these policies was the dramatic narrowing of the gap between the official and parallel market rates. For much of the second half of 2025, this spread fell to below 5 per cent, effectively curtailing the lucrative arbitrage opportunities that had long encouraged speculation and distorted the true market price of the dollar.
"The improved price discovery mechanism and increased transparency in the FX market helped support the naira in the second half of the year," noted Ade Omotosho, an analyst at Kwik Securities. With reduced incentives for round-tripping, basic supply and demand dynamics began to play a more authentic role in pricing, granting the CBN greater control over liquidity.
Further bolstering the naira was a notable growth in Nigeria's foreign exchange reserves. This provided the central bank with increased firepower to intervene in the market, smooth out volatility, and meet legitimate demands for foreign currency, thereby reinforcing investor and business confidence.
Cautious Optimism Amidst Persistent Vulnerabilities
Despite the celebratory headline figure, economists urge a measured perspective. Structural challenges that have long plagued the Nigerian economy remain largely intact. Inflation, though potentially impacted by the stronger currency, is still elevated. The naira's fortune remains tightly tethered to global crude oil prices due to Nigeria's heavy reliance on petroleum exports.
Furthermore, while improved, foreign exchange liquidity is still sensitive to shifts in foreign portfolio investment and disruptions in domestic energy production. These factors mean the sustainability of the naira's gains cannot be taken for granted.
Nevertheless, the 2025 performance represents a clear and historic break from a 13-year trend of annual depreciation. It signals that the CBN's reform agenda is beginning to yield tangible, positive results in the foreign exchange market. For Nigerian businesses, investors, and citizens, the data offers a foundation for cautious optimism regarding the stability and strength of the national currency moving forward.
