For the first time in more than a decade, Nigeria’s national currency has ended a year on a positive note. In 2025, the naira recorded its first annual appreciation since 2012, closing the year at N1,429 to the US dollar. This is an improvement of about 7.4 percent, according to official data from the Central Bank of Nigeria (CBN). This milestone marked a symbolic and economic turning point after thirteen consecutive years of depreciation that had steadily eroded confidence in the currency.
The naira’s recovery did not come easily, nor was it accidental. It was the result of a combination of foreign exchange (FX) market reforms, tighter monetary policy, and stronger regulatory oversight introduced under the leadership of CBN Governor Yemi Cardoso. Together, these measures helped stabilize the FX market, reduce distortions, and restore a measure of credibility to Nigeria’s exchange rate framework.
Between 2012 and 2024, the naira suffered persistent depreciation driven by structural weaknesses in the Nigerian economy. Heavy dependence on imports, limited non-oil exports, chronic FX shortages, and multiple exchange rate regimes combined to create deep market imbalances. Over time, the gap between official and parallel market rates widened, encouraging speculation, arbitrage, and capital flight.
By the start of 2025, these pressures were still evident. Inflation remained elevated, FX demand was strong, and foreign portfolio inflows were slow to return. In the first half of the year, the naira struggled to find its footing, sliding to a low of around N1,602 per dollar in April. For many analysts, this weakness underscored the depth of Nigeria’s FX challenges and raised doubts about the sustainability of earlier reform efforts.
But the tide began to turn from last year May onward. Gradual improvements in FX liquidity, supported by policy clarity and improved market confidence, helped the naira stabilize. By September, the currency had strengthened enough to trade below the ₦1,500-per-dollar threshold, a psychologically important level for businesses and investors.
After a period of consolidation in November, the naira gained further momentum in December, ending the year at its strongest level in twelve months. This late-year rally proved decisive, allowing the currency to post its first annual gain in thirteen years and signaling that the FX reforms were beginning to yield tangible results.
Analysts widely attribute the naira’s turnaround to the FX reforms initiated by the CBN in 2024 and reinforced throughout 2025. One of the most significant achievements of these reforms was the narrowing of the gap between official and parallel market exchange rates to less than 5 percent. This convergence reduced opportunities for arbitrage, discouraged speculative behavior, and improved price discovery in the FX market.
By simplifying the exchange rate framework and improving transparency, the CBN helped restore confidence among market participants. Foreign investors, in particular, responded positively to clearer rules and more predictable pricing, which are essential conditions for portfolio inflows.
In early 2025, the CBN also introduced a foreign exchange conduct code to guide the behavior of banks, dealers, and other market participants. The code aimed to promote ethical practices, reduce market abuse, and strengthen compliance, further enhancing the credibility of the FX system.
FX reforms alone were not enough. The CBN complemented them with tighter monetary policy to address inflationary pressures and support the naira. Higher interest rates helped curb excess liquidity, reduced speculative demand for foreign currency, and made naira-denominated assets more attractive to investors.
Stronger regulatory oversight also played a role. By enforcing prudential standards and monitoring FX transactions more closely, the central bank was better able to manage volatility and respond to emerging risks. These actions sent a clear signal that the era of loose controls and policy inconsistency was coming to an end.
Cardoso gave credence to this when he said that the Naira is now “more competitive” following months of economic reforms and currency stabilization efforts.
Speaking at a G24 media briefing on the sidelines of the ongoing IMF/World Bank Annual Meetings in Washington, Cardoso emphasized that Nigeria’s proactive measures have created resilience against global economic shocks.
“We were able to create resilience and buffers against potential shocks,” Cardoso said. “In terms of anchoring expectations, we found that those who followed the Nigerian economy were fairly comfortable.” He noted that while oil remained Nigeria’s most exposed commodity, the impact had been “relatively modest.”
Cardoso revealed that Nigeria is now experiencing a positive balance of trade, a rare development attributed to the competitiveness of the Naira.
“Now, we have a more competitive currency, and as a result, for once, we have a situation where we have a positive balance of trade surplus,” he said. “We expect it to be around six per cent of Gross Domestic Product (GDP) and remain in that range for some time.”
He added that the currency’s strength is encouraging domestic production and discouraging imports, aligning with the government’s broader economic restructuring agenda.
“Nigeria is completely restructuring its economy,” Cardoso said, “and a competitive currency is helping drive that transformation.”
The naira’s 2025 performance has raised cautious optimism about the outlook for 2026. The CBN projects that inflation will ease significantly, with average inflation forecast at 12.94 percent in 2026, down from about 21.3 percent in 2025. This anticipated decline is expected to be supported by moderating food and fuel prices, greater exchange rate stability, and the cumulative impact of ongoing monetary and structural reforms.
Economic growth is also expected to accelerate. Gross domestic product is projected to expand by about 4.49 percent in 2026, reflecting improved macroeconomic stability, stronger investor confidence, and better FX availability. If realized, this growth could further reinforce currency stability by boosting export earnings and attracting capital inflows.
The naira’s first annual gain in thirteen years is a significant symbolic achievement. It suggests that disciplined policy, credible reforms, and stronger institutions can begin to reverse even long-standing economic trends. Under Governor Yemi Cardoso, the CBN has demonstrated that exchange rate stabilization is possible when reforms are sustained and supported by tight monetary policy.
If reform momentum is maintained and complemented by broader economic transformation, the naira’s performance in 2025 may one day be remembered not just as a rare exception, but as the beginning of a more stable and resilient era for Nigeria’s economy.
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