The Nigerian naira opened Friday’s trading session at N1,580 per dollar in the parallel market, slightly improving from N1,590/$ on Thursday despite a strong U.S. dollar in the global market.
The Nigerian currency remains vulnerable due to structural weaknesses in the country’s economic landscape, particularly its reliance on crude oil for foreign exchange earnings. Concerns over weak global demand, trade tensions between the U.S. and key partners, and increased OPEC+ production quotas continue to put downward pressure on the naira.
Bureau de Change (BDC) operators have raised alarms over foreign currency shortages, with ABCON President Aminu Gwadabe accusing commercial banks of withholding forex sales. Meanwhile, Nigeria’s dependence on foreign portfolio investment (FPI) is under strain, as demand for one-year treasury bills has seen a sharp decline despite the Central Bank of Nigeria (CBN) raising yields.
At this week’s auction, yields on one-year T-bills jumped from 22.52% to 24.9%, yet demand fell drastically to N861 billion, down from N1.5 trillion at the first auction of 2024, highlighting liquidity constraints in the financial sector.
Further compounding economic woes, militants have threatened attacks on oil infrastructure in Rivers State amid an ongoing political dispute over federal fund distribution. An explosion on the Trans-Niger Pipeline, a major crude transport route to the Bonny export terminal, caused significant disruptions, forcing an immediate reroute of oil flows.
Nigeria’s oil production peaked at 1.7 million barrels per day (bpd) in 2024, with the Federal Government aiming to increase output by 1 million bpd over the next two years. However, persistent oil theft and pipeline vandalism pose serious challenges to achieving this target, casting doubts on future forex stability and the naira’s resilience.
Despite these pressures, the Nigerian naira’s relative stability in Q1 2025 contributed to a drop in inflation. Data from the National Bureau of Statistics (NBS) showed inflation eased to 23.18% in February, down from 24.48% in January, marking the first slowdown of the year. Lower energy prices, currency stability, and an inflation index rebasing contributed to this improvement.
As Nigeria grapples with forex shortages, security risks in the oil sector, and declining foreign investment interest, the outlook for the naira remains uncertain.