The Nigerian Naira staged a significant recovery in the foreign exchange market on Monday, December 16, 2025, following a decisive intervention by the Central Bank of Nigeria (CBN). The apex bank injected $250 million into the system to bolster dollar liquidity, a move that came after a worrying 15% week-on-week decline in foreign exchange supply.
Market Reaction to CBN's Liquidity Boost
The immediate impact of the CBN's action was a firming of the local currency across trading windows. At the Nigerian Foreign Exchange Market (NAFEM) official window, the Naira appreciated by 0.18%, closing at ₦1,451.82 to a dollar. This was an improvement from the previous session's close of ₦1,458.50. During the day's trading, the currency touched an intraday high of ₦1,455 and firmed to a low of ₦1,450.
The positive sentiment spilled over into the parallel market, where the Naira strengthened to ₦1,477 per dollar. This broad-based gain reflected renewed confidence among traders and helped to reduce speculative pressures that had been mounting due to a slowdown in inflows from foreign portfolio investors, exporters, and non-bank corporates.
Narrowing Spread and Falling Inflows
A key outcome of the intervention was the sharp narrowing of the gap between the official and parallel market rates. Data from Coronation Merchant Bank Limited showed the spread closed at ₦30.59 per dollar, a significant reduction from ₦44.57 recorded a week earlier. This convergence is viewed by analysts as a positive signal for better price discovery and market stability.
However, underlying challenges persist. Total FX inflows into the official market fell to $716.3 million from $844.7 million the previous week. Foreign portfolio investors remained the largest source, contributing 32.98%, followed by exporters at 30.84%. The CBN's direct contribution accounted for 17.36% of the total inflows.
External Pressures from the Oil Market
The broader economic backdrop remains difficult, with external pressures capping gains. Global oil prices, a critical source of Nigeria's foreign exchange earnings, softened significantly. Brent crude fell to $61.17 per barrel, marking a 4.05% weekly drop and its lowest level since October 2024.
According to a Market Forces Africa report, concerns about an oversupplied market are growing, especially after US projections indicated crude output could peak at 13.61 million barrels per day by end-2025. While OPEC forecasts demand growth, many analysts doubt it will be enough to absorb the incoming supply, keeping pressure on Nigeria's oil-linked FX revenues.
In summary, the CBN's timely $250 million intervention has provided crucial support to the Naira, steadying the currency and narrowing the forex rate gap. Nonetheless, the combination of softer global oil dynamics and sluggish non-oil inflows underscores the need for sustained FX market support and deeper structural reforms to attract foreign exchange.
