In May 2025, the naira experienced a rare moment of strength, gaining ₦16.03 against the US dollar in the official foreign exchange market, buoyed by a steady rise in Nigeria’s external reserves.
Yet, beneath this surface optimism, the parallel market told a contrasting tale of continued pressure on the currency.
The Central Bank of Nigeria (CBN) reported that the naira closed at ₦1,586.15 to the dollar on May 30, rising 1.01% from ₦1,602.18 at the start of the month.
This gain coincided with a modest rise in Nigeria’s external reserves, which climbed by $460 million to $38.46 billion.
Parallel Market Shows Weakness
However, the parallel market told a different story.
There, traders pushed the naira down by 0.9%, closing at ₦1,620 to the dollar, down from ₦1,605 in early May.
This divergence highlights ongoing volatility within Nigeria’s fragmented FX market.
CBN Intervention Supports Stability
Looking ahead, analysts at Afrinvest Securities Limited expect the naira to maintain its trajectory in June, as the CBN continues intervening to stabilise the currency.
Experts Call Naira Undervalued
Despite recent improvements, experts like CEO of CFG Advisory, Tilewa Adebajo, argue that the naira remains undervalued.
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He believes the currency should trade below ₦1,000 to the dollar based on stronger economic fundamentals, including a more transparent FX market, improved reserves, and increased oil production.
Reforms such as the Bloomberg BMatch platform have narrowed the gap between official and parallel rates from over 50% in 2022 to under 5% in 2025.
Diaspora Engagement Boosts Inflows
Moreover, in May, the CBN launched the Non-Resident Diaspora Bank Verification Number to boost remittance inflows from Nigerians abroad.
CBN Governor Olayemi Cardoso reaffirmed the goal of attracting $1 billion in monthly diaspora remittances, emphasising regulatory compliance to ensure market stability.
Outlook: Cautious Optimism
Overall, the naira’s May gains and rising reserves suggest a cautiously optimistic outlook for Nigeria’s currency.
