The naira sits delicately on the edge of shifting tides.
As inflation cools and the Central Bank of Nigeria signals a possible rate cut in September, optimism is stirring in local markets.
Yet behind the prospect of cheaper credit and livelier equities lurks a concern: whether easing policy could blunt foreign inflows and leave the currency exposed.
Nigeria’s inflation rate dropped to 21.88% in July from 22.22% in June 2025, according to the National Bureau of Statistics (NBS).
Analysts Expect A Rate Cut
Consequently, analysts expect the CBN to respond with a rate cut.
United Capital, in a recent report, stated: “The MPC of the CBN may consider an interest rate cut at its September 2025 meeting.”
The firm explained that lower rates would cut borrowing costs, lift equities, create opportunities in fixed income, and encourage more companies to raise funds in the capital market.
Risks To FX And The Naira
However, financial experts also warn of risks.
A Nigerian financial services group, Norrenberger, cautioned that monetary easing could weaken foreign portfolio investor (FPI) appetite and reduce foreign exchange (FX) inflows.
At the same time, seasonal demand from summer travel and overseas tuition payments will likely push FX demand higher, which in turn may pressure the naira.
On Tuesday, the naira slipped by 0.08% as the dollar traded at ₦1,534.93 compared with ₦1,533.67 on Monday, CBN data showed.
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In the parallel market, the rate stayed flat at ₦1,545 per dollar.
OMO Sales And Market Outlook
Meanwhile, FX inflows into Nigeria grew in recent months, supported by renewed FPI interest, steady diaspora remittances, and a favourable trade balance.
Yet Norrenberger argued that these inflows may prove difficult to sustain in the second half of 2025.
To stabilise liquidity, the CBN aggressively ramped up open market operations (OMO) in 2024.
The Bank sold ₦13.5 trillion in OMO bills, a sharp jump from ₦723 billion in 2023.
On November 11, 2024 alone, it sold more than ₦1.4 trillion in 365-day OMO paper—almost double the entire 2023 volume.
Because yields soared, the policy attracted investors.
The 362-day OMO yield climbed to 24.4% in September 2024, far above U.S. rates, which boosted carry trade inflows.
Looking ahead, investors and policymakers will closely watch the September MPC meeting as the CBN balances the push for growth through lower interest rates with the need to protect naira stability.
