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- PricewaterhouseCoopers sees the naira trading within the calm band in 2025
- It attributed this to five reasons
- The reasons include increased liquidity, market transparency, and the restoration of investor confidence
A recent report by PricewaterhouseCoopers (PwC) titled, ‘2025 Nigerian Budget and Economic Outlook,’ predicted that the naira will trade relatively calmly throughout 2025.
The PwC’s report, like earlier reports, hinged its prediction on the back of some policies currently being implemented by the Federal Government and the monetary policies of the Central Bank of Nigeria (CBN).
In 2024, the naira traded poorly as it lost 40 per cent of its value in the first half of 2024 and lost 43 per cent of its value by the end of the year as one of the worst-performing currencies on the African continent.
However, due to some policies of both the fiscal and monetary authorities, the naira appreciated from N1,663/$ in December 2024 to N1,536/$ as of January 27, 2025.
It further appreciated to N1,640/$ in the parallel market on Tuesday, January 28 from N1,655 per dollar on Monday, January 27.
At the Nigerian Foreign Exchange Market (NFEM), the naira appreciated to N1,526.3 per dollar from N1,533.5 per dollar on Monday, indicating N7.2 appreciation for the naira.
5 reasons the naira will trade calmly in 2025
1. Price discovery
According to PwC, the efforts of the CBN to stay on its core mandate of eliminating multiple exchange rates in the market, which created opportunities for arbitrage and market distortions, will play a huge role in keeping the naira relatively calm in 2025.
The unification of the exchange rates by the CBN ensured that they found its true value, allowing it to be determined by market forces and not at the whims and caprices of market dealers.
2. Transparent guidelines and market information
The PwC also noted that CBN’s efforts to provide clearer guidelines and more accessible information about the forex market for businesses and investors have helped in the ease experienced in the forex market.
The CBN, under the leadership of Olayemi Cardoso, has taken steps to enhance transparency and efficiency in the Nigerian market unlike what previously obtained.
Through the introduction of such policies as the Electronic Foreign Exchange Market System (EFEMS) and the recently launched FX Code, the CBN has further instilled transparency and fostered ethical conduct in the market.
Like Cardoso said at the launch of the FX Code, “The era of opaque practices is over” and “bureaucratic bottlenecks in assessing forex” have been removed to allow for market stability and predictability.
3. Increased liquidity
The increased liquidity in the economy due to factors like improved oil production, capital importation, and the increase in diaspora remittances through the International Money Transfer Operators (IMTOs) are expected to help in the stability of the naira in 2025.
Recall that in November 2024, Nigeria’s average daily oil production was 1.486 million barrels per day, which signals more dollar liquidity for Nigeria.
In the third quarter of 2024, capital importation reached $1.25 billion, a 91.35 per cent increase from what was recorded in Q3 2023.
Also, diaspora remittances processed through IMTOs reached $3.82 billion between January and September 2024, almost double the $2.62 billion recorded during the same period in 2023.
The CBN’s effort to ensure dollar liquidity is also worth mentioning. The apex bank granted licenced Bureau De Change (BDC) operators access to purchase forex directly from authorised dealers to meet customers’ needs ensure forex stability and reduce market volatility.
4. Clearing supply-demand backlogs
The CBN’s persistence in ensuring that the backlog of all valid forex is cleared is another factor that has contributed to the relative stability of the naira.
On Wednesday, January 29, the CBN announced that the Federal Government has cleared the outstanding $7 billion forex backlog following a successful verification exercise by forensic auditors.
Cardoso earlier announced the completion of forensic verification to clear all pending foreign exchange backlogs, saying it will soon commence payments.
He said the $7 billion of FX backlogs took over 12 months to verify and led to the discovery of multiple unethical and illegal practices in the market.
5. Instilling market and investor confidence
Another reason the naira will experience stability in 2025 is the restoration of investor confidence in the market by the CBN.
The lack of transparency which previously obtained in the market had made both local and foreign investors adopt a cautious stance to Nigeria’s forex market. This is not unconnected to the persisting multiple exchange rate regime and regulatory challenges.
However, through targeted policies and reforms, the CBN has restored the confidence of long-lost investors in the market. This was also acknowledged by the International Monetary Fund (IMF), which noted that the Nigerian capital market is undergoing a significant restoration of investor confidence.
PwC noted that “Global portfolio investors have been showing renewed interest in investing in Nigeria.”
Experts project naira, FX stability, MPR, inflation decline, fuel price slash, others in 2025
Meanwhile, TheRadar earlier reported that experts projected some of the economic realities that will shape 2025.
These include stability of the naira and the foreign exchange (forex) market, decline in the Monetary Policy Rate (MPR) and inflation rate, reduction in fuel price, and growth of other economic indicators.
