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2025 naira outlook
Understanding the latest gains against the dollar
•How Trump presidency may affect us
•Rewane, Muda Yusuf, Onyekpere, others speakThe naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform
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December 15, 2024
2025 naira outlook
Naira
•Understanding the latest gains against the dollar
•How Trump presidency may affect us
•Rewane, Muda Yusuf, Onyekpere, others speak
By Tunde Oso
The naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform.
Data obtained from the CBN’s website showed that the closing exchange rate, which was N1,672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ at the end of the week on Friday, December 6, 2024, representing an 8.24 per cent gain.
Unknown to many Nigerians, the CBN recently launched a new trading system called the Enhanced Foreign Exchange Market System (EFEMS). EFEMS essentially consolidates all previous official FX windows into one unified system.
This consolidation replaces the fragmented structure of multiple windows, such as the Investors & Exporters (I&E) FX Window, the SME Window, and the Invisible Window.
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor.
This has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
One person familiar with the operation of the market suggests that the market is experiencing more supply than demand. With supply outstripping demand, the naira has gained against the dollar.
However, it is unclear where the supply in the market is coming from, as there is no official data to explain this.
For instance, the dynamics of pricing might change if the supply is primarily driven by the CBN.
The new system also mandates a minimum trade value of $100,000 for all interbank FX transactions, which seems to have curtailed speculative activities in the market.Unlike the previous opaque system, FX dealers said the current system is order-based, similar to the way stocks are traded on the NGX.
For example, bids (buying requests) are displayed on the system along with their bid prices, while offers (selling requests) are also shown with their corresponding prices.
This makes it easier to determine how much FX is available in the market and the prevailing prices.
The CBN’s new guidelines for FX trading also introduce rigorous reporting requirements.
For example, Authorized Dealers must report FX transactions to the CBN within 10 minutes via an API-based system.
BDCs are required to submit daily activity reports through automated portals, while Commercial and Merchant Banks must adopt real-time reporting to enhance monitoring and oversight.
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December 15, 2024
2025 naira outlook
Naira
•Understanding the latest gains against the dollar
•How Trump presidency may affect us
•Rewane, Muda Yusuf, Onyekpere, others speak
By Tunde Oso
The naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform.
Data obtained from the CBN’s website showed that the closing exchange rate, which was N1,672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ at the end of the week on Friday, December 6, 2024, representing an 8.24 per cent gain.
Unknown to many Nigerians, the CBN recently launched a new trading system called the Enhanced Foreign Exchange Market System (EFEMS). EFEMS essentially consolidates all previous official FX windows into one unified system.
This consolidation replaces the fragmented structure of multiple windows, such as the Investors & Exporters (I&E) FX Window, the SME Window, and the Invisible Window.
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor.
This has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
One person familiar with the operation of the market suggests that the market is experiencing more supply than demand. With supply outstripping demand, the naira has gained against the dollar.
However, it is unclear where the supply in the market is coming from, as there is no official data to explain this.
For instance, the dynamics of pricing might change if the supply is primarily driven by the CBN.
The new system also mandates a minimum trade value of $100,000 for all interbank FX transactions, which seems to have curtailed speculative activities in the market.
Opaque system
Related News
Supply hawkers mint naira notes, pay N150m fine – CBN warns banks
Old Naira notes remain valid – CBN
Jawando’s “Reflection IV” typifies resilience in artistic journey
Unlike the previous opaque system, FX dealers said the current system is order-based, similar to the way stocks are traded on the NGX.
For example, bids (buying requests) are displayed on the system along with their bid prices, while offers (selling requests) are also shown with their corresponding prices.
This makes it easier to determine how much FX is available in the market and the prevailing prices.
The CBN’s new guidelines for FX trading also introduce rigorous reporting requirements.
For example, Authorized Dealers must report FX transactions to the CBN within 10 minutes via an API-based system.
BDCs are required to submit daily activity reports through automated portals, while Commercial and Merchant Banks must adopt real-time reporting to enhance monitoring and oversight.
BDC role
The role of Bureau De Change (BDC) operators is critical under the new regulations, fostering further transparency in the functioning of the market.
For instance, under the new guidelines, licensed BDC operators are allowed to buy FX from Authorized Dealers to meet customer needs.
This measure aims to balance market accessibility with effective monitoring and control.
The BDC segment, which had previously been excluded from certain FX market activities, is now positioned to play a more active role in meeting retail FX demand.
This inclusion is expected to provide a buffer against the FX pressures faced by individuals and small businesses reliant on BDC services
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December 15, 2024
2025 naira outlook
Naira
•Understanding the latest gains against the dollar
•How Trump presidency may affect us
•Rewane, Muda Yusuf, Onyekpere, others speak
By Tunde Oso
The naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform.
Data obtained from the CBN’s website showed that the closing exchange rate, which was N1,672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ at the end of the week on Friday, December 6, 2024, representing an 8.24 per cent gain.
Unknown to many Nigerians, the CBN recently launched a new trading system called the Enhanced Foreign Exchange Market System (EFEMS). EFEMS essentially consolidates all previous official FX windows into one unified system.
This consolidation replaces the fragmented structure of multiple windows, such as the Investors & Exporters (I&E) FX Window, the SME Window, and the Invisible Window.
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor.
This has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
One person familiar with the operation of the market suggests that the market is experiencing more supply than demand. With supply outstripping demand, the naira has gained against the dollar.
However, it is unclear where the supply in the market is coming from, as there is no official data to explain this.
For instance, the dynamics of pricing might change if the supply is primarily driven by the CBN.
The new system also mandates a minimum trade value of $100,000 for all interbank FX transactions, which seems to have curtailed speculative activities in the market.
Opaque system
Related News
Supply hawkers mint naira notes, pay N150m fine – CBN warns banks
Old Naira notes remain valid – CBN
Jawando’s “Reflection IV” typifies resilience in artistic journey
Unlike the previous opaque system, FX dealers said the current system is order-based, similar to the way stocks are traded on the NGX.
For example, bids (buying requests) are displayed on the system along with their bid prices, while offers (selling requests) are also shown with their corresponding prices.
This makes it easier to determine how much FX is available in the market and the prevailing prices.
The CBN’s new guidelines for FX trading also introduce rigorous reporting requirements.
For example, Authorized Dealers must report FX transactions to the CBN within 10 minutes via an API-based system.
BDCs are required to submit daily activity reports through automated portals, while Commercial and Merchant Banks must adopt real-time reporting to enhance monitoring and oversight.
BDC role
The role of Bureau De Change (BDC) operators is critical under the new regulations, fostering further transparency in the functioning of the market.
For instance, under the new guidelines, licensed BDC operators are allowed to buy FX from Authorized Dealers to meet customer needs.
This measure aims to balance market accessibility with effective monitoring and control.
The BDC segment, which had previously been excluded from certain FX market activities, is now positioned to play a more active role in meeting retail FX demand.
This inclusion is expected to provide a buffer against the FX pressures faced by individuals and small businesses reliant on BDC services.
If BDCs are sourcing FX from the same market, their pricing is unlikely to differ significantly from official rates, reducing the wide disparities previously observed.
This marks a significant departure from earlier years when the black market often influenced official rates.
However, this expanded operational scope comes with conditionality: The total monthly transactions for BDCs are subject to an aggregate cap as determined by the CBN.
The Association of Bureau De Change Operators of Nigeria (ABCON) stated that the permission for BDCs to purchase foreign exchange directly from Authorized Dealers is not automatic.
Only BDC operators that meet the current capital requirements are permitted to participate in this market.
“We received the news with mixed reactions,” said Aminu Gwadabe, ABCON President.
“While it is intended to increase liquidity at the retail end of the forex market, it is contingent on meeting the new recapitalization requirements of either ¦ 500 million or ¦ 2 billion as stated in the May guidelines.
“However, it does not specifically permit all currently licensed BDCs to purchase foreign exchange from the interbank market.”
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December 15, 2024
2025 naira outlook
Naira
•Understanding the latest gains against the dollar
•How Trump presidency may affect us
•Rewane, Muda Yusuf, Onyekpere, others speak
By Tunde Oso
The naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) platform.
Data obtained from the CBN’s website showed that the closing exchange rate, which was N1,672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ at the end of the week on Friday, December 6, 2024, representing an 8.24 per cent gain.
Unknown to many Nigerians, the CBN recently launched a new trading system called the Enhanced Foreign Exchange Market System (EFEMS). EFEMS essentially consolidates all previous official FX windows into one unified system.
This consolidation replaces the fragmented structure of multiple windows, such as the Investors & Exporters (I&E) FX Window, the SME Window, and the Invisible Window.
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor.
This has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
One person familiar with the operation of the market suggests that the market is experiencing more supply than demand. With supply outstripping demand, the naira has gained against the dollar.
However, it is unclear where the supply in the market is coming from, as there is no official data to explain this.
For instance, the dynamics of pricing might change if the supply is primarily driven by the CBN.
The new system also mandates a minimum trade value of $100,000 for all interbank FX transactions, which seems to have curtailed speculative activities in the market.
Opaque system
Related News
Supply hawkers mint naira notes, pay N150m fine – CBN warns banks
Old Naira notes remain valid – CBN
Jawando’s “Reflection IV” typifies resilience in artistic journey
Unlike the previous opaque system, FX dealers said the current system is order-based, similar to the way stocks are traded on the NGX.
For example, bids (buying requests) are displayed on the system along with their bid prices, while offers (selling requests) are also shown with their corresponding prices.
This makes it easier to determine how much FX is available in the market and the prevailing prices.
The CBN’s new guidelines for FX trading also introduce rigorous reporting requirements.
For example, Authorized Dealers must report FX transactions to the CBN within 10 minutes via an API-based system.
BDCs are required to submit daily activity reports through automated portals, while Commercial and Merchant Banks must adopt real-time reporting to enhance monitoring and oversight.
BDC role
The role of Bureau De Change (BDC) operators is critical under the new regulations, fostering further transparency in the functioning of the market.
For instance, under the new guidelines, licensed BDC operators are allowed to buy FX from Authorized Dealers to meet customer needs.
This measure aims to balance market accessibility with effective monitoring and control.
The BDC segment, which had previously been excluded from certain FX market activities, is now positioned to play a more active role in meeting retail FX demand.
This inclusion is expected to provide a buffer against the FX pressures faced by individuals and small businesses reliant on BDC services.
If BDCs are sourcing FX from the same market, their pricing is unlikely to differ significantly from official rates, reducing the wide disparities previously observed.
This marks a significant departure from earlier years when the black market often influenced official rates.
However, this expanded operational scope comes with conditionality: The total monthly transactions for BDCs are subject to an aggregate cap as determined by the CBN.
The Association of Bureau De Change Operators of Nigeria (ABCON) stated that the permission for BDCs to purchase foreign exchange directly from Authorized Dealers is not automatic.
Only BDC operators that meet the current capital requirements are permitted to participate in this market.
“We received the news with mixed reactions,” said Aminu Gwadabe, ABCON President.
“While it is intended to increase liquidity at the retail end of the forex market, it is contingent on meeting the new recapitalization requirements of either ¦ 500 million or ¦ 2 billion as stated in the May guidelines.
“However, it does not specifically permit all currently licensed BDCs to purchase foreign exchange from the interbank market.”
He added, “It is tied and subject to meeting the new capitalization guidelines introduced by the CBN in May 2024.
“This also addresses questions about the sources of funds under the new BDC guidelines raised by many applicants. It is not automatic but conditional on meeting these new requirements.”
Panic Selling
Panic selling is widely regarded as a significant factor behind the sharp appreciation in the exchange rate between the naira and the dollar.
Several economic reports have suggested that the exchange rate of N1, 600/$1 is not reflective of the naira’s true value, an opinion volunteered by the CBN Governor Yemi Cardoso at the Bankers’ Committee Annual Dinner.
Uncertainties rule marketSome speculators also point to the December period, which, according to historical data, is often associated with the naira strengthening against the dollar.
This trend is partly attributed to increased dollar inflows from Diaspora Nigerians returning for Christmas holidays.
It is also observed that similar boosts in Nigeria’s FX market have been observed before, where the naira suddenly gains strength before depreciating again.
For example, in April this year, the naira appreciated to as high as N1, 072/$1 before it started to weaken again.
At the time, the CBN had just lifted the suspension of FX sales to BDC operators, injecting liquidity into the system.
Sunday Vanguard aggregated the opinions of economists and financial experts even as the developments also attracted comments of others.
Naira undervalued by over 26% , says Rewane
During a presentation earlier in the year, Bismarck Rewane, Managing Director/Chief Executive Officer of Financial Derivatives Company Limited, said naira was undervalued by 26.56 percent at the official market and saw the currency appreciating to N1, 525 per dollar in 2025.
Rewane pointed out that the gap between the NAFEM and the parallel FX market had narrowed to as low as N4.75.
However, he observed that the naira’s volatility in the parallel market persisted due to factors such as low-interest rates, speculation on the naira, and FX scarcity.
Presently, the exchange rate gap between the NAFEM window and the parallel market stands at N155.49 per dollar.
Then, at the official market, the dollar was quoted at N1, 089.51, while in the black market, it was valued at N1, 245/$ last week.
Rewane expressed that at the parallel market rate of N1, 245/$, the naira was undervalued by 35.73 percent.
The expert emphasized the pivotal role of capital control measures in shaping the future of the naira. According to him, the removal of these controls, coupled with increased transparency in the FX market, was poised to fortify the naira’s position.
In the optimistic scenario envisioned by Rewane, the elimination of capital controls was anticipated to usher in a new era of transparency and confidence in the FX market.
Predicting stability, he foresaw the exchange rate stabilising at N900 per dollar throughout the years 2024 and 2025.
Additionally, he expected a substantial surge in foreign inflows, estimating an influx ranging from $8 to $10 billion in 2024 and N1 billion in 2025. This upswing is anticipated to result from various channels, including remittances, foreign direct investment (FDIs), foreign portfolio investment (FPIs), and invisible transactions.
Muda Yusuf: Challenge now is how to stabilise naira in 2025
Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, also spoke, saying, “The foreign exchange market has witnessed a significant level of stability in the past 5 to 6 months.
“Evidently, the degree of volatility that we saw last year and early part of this year has reduced significantly.
“So I think we must give some credits to the Central Bank of Nigeria, you know, for some of these outcomes because some of the positive outcomes that you have witnessed are also results of the various steps that have been taken by the Central Bank of Nigeria within the framework of the foreign exchange policy reforms.
“For instance, we have seen some remarkable inflows from the IMTOs, That is, International Money Transfer Organizations.
“The inflows from this window, inflow of FX, I mean, has improved considerably over the last few months.
“You know, before now, there were all manner of restrictions, particularly with regard to the exchange rates, on which inflows can be brought into the country.
“But now that we have a largely liberal exchange rate regime, the inflows from the MTOs have improved significantly because people are now free to bring in their funds at whatever the market exchange rate is.
“And, there’s also the window of willing buyer, willing seller. So that has had some impact on the positive outlook that we have seen with respect to the naira.
“Then not too long ago, we had a domestic dollar bond that was issued by the Minister of Finance.
“The dollar bond was $500,000,000, and it was even oversubscribed.
“So that also has contributed to the dollar liquidity in some ways, and that has also helped the capacity of the CBN to be able to stabilize the market.
Source :Vanguard
