The Nigerian naira experienced its most severe single-day drop in recent weeks at the official foreign exchange window, succumbing to intense pressure from a deepening shortage of US dollars. This sharp decline occurred on Friday, December 21, 2025, even as the Central Bank of Nigeria (CBN) attempted to stabilise the market with fresh interventions.
Official Market Records Steep Decline
Market data reveals a clear picture of the strain. The naira's spot exchange rate touched an intraday high of N1,469.90 per US dollar, a significant weakening from the previous day's closing level of N1,462. By the end of the trading session, the currency had closed at N1,464.4974 per dollar, according to an official CBN update. This marked a notable depreciation from the prior day's closing rate of N1,457.8402.
The decline underscores a critical issue: demand for foreign currency, particularly from importers and other market participants, is vastly outstripping available supply. Despite the apex bank's direct contributions to dollar supply, complemented by inflows from exporters and foreign portfolio investors, these measures proved insufficient to meet the overwhelming market appetite.
CBN Efforts Overwhelmed by Market Forces
The central bank's struggle to defend the naira highlights the scale of the challenge. Liquidity constraints are severely limiting the effectiveness of regulatory support. A key factor exacerbating the dollar scarcity is the reduced inflow from international oil companies (IOCs). These firms have become more cautious, holding back dollar sales due to uncertainty in the global crude oil market, which is directly weighing on their earnings expectations and dollar liquidity.
Furthermore, non-corporate foreign exchange inflows channeled through commercial banks have also tightened, reflecting this broader reduction in dollar contributions from key sectors of the economy.
Global Oil Market Weakness Adds to Nigeria's Woes
External factors are compounding Nigeria's foreign exchange crisis. The global crude oil market, a primary source of dollar revenue for the nation, saw prices decline during the week. Brent crude fell by 1.56% week-on-week to settle around $60.14 per barrel. This drop was driven by rising expectations of a potential Russia-Ukraine peace deal and speculation around eased sanctions, which raised concerns about a future oversupply in the market.
Analysts warn that bearish sentiment could push Brent crude below $60 per barrel by year-end. The International Energy Agency's downward revision of its 2026 oversupply forecast, coupled with expectations of weaker global demand, is dampening outlooks. For Nigeria, softer oil prices translate directly into tighter foreign exchange inflows, applying further pressure on an already strained currency market.
The situation presents a complex challenge for monetary authorities. With domestic dollar scarcity persisting and external revenue streams under threat from volatile oil prices, the naira remains vulnerable to continued volatility. Market signals point to sustained foreign exchange stress, requiring more than periodic interventions to achieve lasting stability.
