Here’re five reasons FX crisis will ease in 2025

Nigeria’s foreign exchange crisis has found some relative calmness on the back of some policy actions implemented by the current government, according to a new report.

PwC, an advisory and tax services company in its 2025 budget and economic outlook released on Thursday highlighted five factors that are easing pressure on the naira.

The naira for most part of 2024 was accorded one of the World’s worst performing currencies alongside the Lebanese pound. It shed about 41 percent of its value and was largely unpredictable.

But with some key reforms introduced by the Central Bank of Nigeria (CBN) the naira is finally finding its footing and confidence is building.

Here are the five reasons according to PwC:

Price Discovery

The CBN has stayed through one of its core mandates of eliminating multiple exchange rates in the market, which created opportunities for arbitrage and market distortions.

This stance by the apex bank and the direction towards unifying multiple exchange rates into a single rate has brought needed breather to the FX market, enabling the naira to be determined by fundamentals of the market.

Read also: FX crisis puts Nigerian economy on investors’ ghost mode

Transparency and market friction

The Olayemi Cardoso led CBN has taken steps to enhance transparency and efficiency in the Nigerian market unlike the limited clarity and transparency that marked the foreign exchange transactions before now.

With the CBN reforms, “bureaucratic bottlenecks in assessing forex” has been wiped out, allowing for stability and predictability.

PwC highlighted clearer guidelines and more accessible information for businesses and investors as some of the reasons FX is easing. The introduction of the Electronic Foreign Exchange Market System (EFEMS) was identified as one of the reasons for the recent calmness.

The recently launched FX code is also expected to further enhance operations of authorised dealers further bringing transparency to the Nigerian exchange rate market.

Liquidity

The relative improved liquidity in the Nigerian economy is equally stabilising the exchange rate. In December 2024, Nigeria’s average daily oil production was 1.49 million barrels per day. A rise in oil production means more dollar liquidity for a nation targeting 2.06 mbpd this year.

Similarly, in the third quarter of 2024, capital importation totaled $1.25 billion, a 91.35 percent increase from Q3 2023. This is as diaspora remittances through IMTOs reached $4.22 billion, nearly doubling the $2.62 billion from the same period in 2023, from January to October 2024.

Supply-Demand backlogs

Nigeria faced a substantial backlog of unmet foreign exchange orders estimated at around $7 billion. The CBN under Cardoso made significant strides in addressing the FX backlog, restoring confidence in the market.

Market and investor confidence

Due to the lack of transparency in the Nigerian market, both foreign and local investors were cautious as there was a multiple exchange rate regime and regulatory challenges persisted.

Moves by the CBN have however brought in long-lost investor confidence. The International Monetary Fund noted that the Nigerian capital market is undergoing significant restoration of investor confidence.

“Global portfolio investors have been showing renewed interest in investing in Nigeria,” PwC said.

In many economic outlook seen by BusinessDay, the naira has been largely predicted to stable all through the year on sustained reforms. The Nigeria Economic Summit Group (NESG) sees the naira at an average of N1,300 per U.S dollar.