Reform Or Ruin? Naira Plummets Amid CBN’s Bold FX Moves

Reform Or Ruin? Naira Plummets Amid CBN’s Bold FX Moves

The naira faced a sharp 41% depreciation in 2024, closing the year at an official exchange rate of N1,535/$, as reported by the Central Bank of Nigeria (CBN). This marks a significant decline from N907.11/$ at the end of…Reform Or Ruin? Naira Plummets Amid CBN’s Bold FX Moves

2023.

Despite bold policy reforms, including the unification of FX trading windows and the introduction of the Nigerian FX Code, the naira continued to face intense pressure. These measures, aimed at boosting market transparency and attracting foreign investors, fell short of reversing the currency’s downward spiral.

On the parallel market, the naira fared worse, ending 2024 at N1,660/$, a 26.8% drop from N1,215/$ in 2023. Limited dollar inflows, high demand in the unofficial market, and lingering foreign exchange backlogs were cited as primary contributors.

CBN’s Bold Moves Amid Currency Crisis

The CBN implemented a series of interventions to stabilize the naira, including:

• Automation of FX Trading: Replacing over-the-counter systems to enhance efficiency.
• Revised BDC Guidelines: Restricting Bureau de Change operators to sourcing FX for approved purposes like Personal Travel Allowance (PTA).
• Direct FX Sales to BDCs: During peak demand periods, capped at $25,000 weekly per dealer.
• Clearing FX Backlogs: Successfully addressing $7 billion in outstanding claims.

These steps were complemented by the Voluntary Disclosure and Repatriation Scheme, allowing Nigerians to deposit internationally tradable foreign currencies for investment.

Global Reactions and Projections

The World Bank ranked the naira among Sub-Saharan Africa’s worst-performing currencies in 2024. Surging demand for dollars and capital flight by foreign investors compounded the crisis. However, the International Monetary Fund noted signs of stabilization, crediting recent interest rate hikes and CBN’s efforts to ease FX constraints.

President Bola Tinubu, during the 2025 budget presentation, projected a gradual recovery for the naira. He forecasted a return to N1,500/$, supported by improved crude oil production and inflation reduction from 34.6% to 15%.

Cautious Optimism for 2025

Despite Fitch Ratings warning of potential fiscal challenges, the Association of Bureau De Change Operators expressed optimism. Its president, Aminu Gwadebe, believes that the reforms have set the stage for the naira’s recovery.

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