In Q1 2025, the Central Bank of Nigeria (CBN) reportedly spent $668.8 million in foreign exchange interventions to cushion the Naira against growing market pressures. This information, detailed in a recent AllCO Capital Limited report, highlights the ongoing struggle to stabilise the local currency amidst soaring demand for foreign exchange.

Yet, despite this hefty intervention, the naira still recorded a 2.97% decline in March alone, slipping from ₦1,492.49/$ to ₦1,536.82/$. In some parts of the parallel market, it traded as high as ₦1,600/$ during the same period.

Backstory: How Did We Get Here?
At the outset of this administration, the Federal Government championed a fully market-driven, floating naira, promising that public reserves would no longer be tapped to prop up the currency. This reform was hailed as a bold move toward true liberalization, allowing supply and demand to reveal the naira’s genuine market value.

Yet, in Q1 2025, the Central Bank of Nigeria deployed $668.8 million of foreign reserves to stabilize the naira. This sizable intervention directly contradicts the government’s earlier commitment to a hands-off FX policy.

Why Did Nigeria Have to Spend So Much?
Global headwinds, notably escalating trade tensions between the U.S. and China, sent shockwaves through emerging-market currencies. As international investors sought safety, demand for foreign exchange spiked, and the naira came under severe downward pressure, even trading as weak as ₦1,600 to the dollar in some segments. To cushion these external shocks and temper speculative runs on the currency, the Federal Government liquidated a portion of its FX holdings.

Despite these efforts, the naira still depreciated by nearly 3 percent in March alone, underscoring the magnitude of the external pressures and raising critical questions about the sustainability and coherence of Nigeria’s FX strategy.

What Does This Mean for Businesses and Everyday Nigerians?

• For businesses, especially importers, manufacturers, and treasury managers, this means continued pricing uncertainty, FX risk exposure, and difficulty planning for long-term contracts or procurement.
• For individuals, it translates to increased inflation, higher cost of goods and services, shrinking savings, and unstable purchasing power.

A Reflective Pause:

If the naira is still weakening despite nearly $700 million in defense, then what is the true market value of the naira without this artificial support?
And more importantly, is this kind of intervention even sustainable in the long run?