LAGOS — The Nigerian naira suffered a sharp depreciation in March 2025, sliding by 2.4% and 2.6% at the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market, respectively, as foreign exchange demand pressures persisted despite the Central Bank of Nigeria’s interventions.

According to the Afrinvest Monthly Market Report, the naira closed the month at N1,536.82/$ at the official window and N1,530/$ in the parallel market, with pressure mounting from foreign portfolio investors and corporates scrambling for dollars amid global economic headwinds.

In its monthly outlook, AIICO Capital confirmed the naira’s downward spiral, attributing the dip to strong demand across sectors, despite the CBN pumping $668.8 million into the system. The firm noted that the naira weakened by 2.97% month-on-month, starting March at N1,492.49/$ before sliding to the month-end level.

“Liquidity improved mid-month on the back of CBN dollar sales, but supply still trailed demand,” AIICO said, adding that even in the final week of March, a 0.5 basis point appreciation was not enough to ease the broader market strain. On a quarterly basis, the naira depreciated by 7 basis points, while Nigeria’s external reserves fell by $110 million to $38.31 billion.

The report warns that the naira will remain volatile in the short term, citing geopolitical risks, such as the escalating U.S. trade war and potential capital flight, as factors likely to rattle Nigeria’s already fragile foreign exchange market.

CBN Injects Fresh Liquidity Amid April Volatility

With mounting global and domestic pressures, the CBN last week sold an additional $197.71 million to authorized dealers between April 3 and 4, in a bid to stabilise the market. The naira traded between N1,519 and N1,595.20/$, reflecting persistent instability.

In a statement signed by Omolara Duke, Director of the CBN’s Financial Markets Department, the apex bank reiterated its commitment to maintaining market liquidity and ensuring transparent, efficient operations.

“This measured step aligns with the Bank’s broader objective of fostering a stable, transparent, and efficient foreign exchange market,” the statement said. “All authorised dealers are reminded to adhere strictly to the principles outlined in the Nigeria FX Market Code.”

Despite these efforts, the naira experienced heightened week-on-week volatility, driven by surging offshore demand, weaker oil prices due to OPEC+’s production hike, and rising global uncertainty triggered by President Donald Trump’s fresh round of tariffs.

The currency dipped to a weekly low of N1,570/$, eventually closing at N1,567.02/$, marking a 1.97% weekly loss, while foreign reserves dipped by another $149 million to $38.15 billion.

External Pressures and the End of Naira-for-Crude Initiative

Market analysts at Afrinvest warn that the naira may face deeper pressure with the discontinuation of the naira-for-crude initiative, as local refineries and petrol importers begin demanding dollars to meet operational needs.

“Against this backdrop, we expect the naira to remain pressured near-term, barring any unforeseen shocks,” the analysts stated.

CardinalStone Partners, in its macroeconomic update, also flagged concerns over increased domestic dollar demand and an offshore investor exodus, noting a 1-month return of -8.6% and year-to-date return of -5.8% for the naira.

They highlighted weak government revenues, widening fiscal deficits, and falling oil production—1.67 mbpd in February vs. 1.74 mbpd in January—as aggravating factors, coupled with a 14.2% year-to-date decline in global crude prices.

Experts Warn of Imported Inflation Risks

Adding to the economic concerns, former Zenith Bank chief economist Marcel Okeke cautioned that Trump’s widening tariff war could trigger a global inflation surge, with Nigeria particularly vulnerable due to its high import dependence.

“We’re likely to see an uptick in imported inflation,” Okeke said. “Nigeria’s economy remains deeply exposed to global supply chain shifts and currency risks.”

As global and local market forces continue to collide, analysts agree that the Central Bank will need to intensify its interventions and fiscal authorities must urgently address the nation’s structural weaknesses to restore investor confidence and currency stability.