The Central Bank of Nigeria (CBN) injected $580 million into the foreign exchange market in May 2025 as part of intensified efforts to stabilise the naira and restore investor confidence. This intervention came despite a continued drop in Nigeria’s external reserves, which fell to $38.045 billion by the end of the month, raising concerns about the long-term viability of such actions.

According to market analysts, the CBN’s move sought to ease pressure stemming from high dollar demand and lower oil revenues, factors that had driven the naira to a record low of N1,614 per dollar earlier in the month.

However, the prompt response—supported by inflows from exporters and foreign portfolio investors—improved FX liquidity and helped the naira stage a modest recovery. AIICO Capital Limited reported that the currency traded between N1,575 and N1,610 per dollar in May, ultimately closing at N1,586.15, a slight gain of 66 basis points compared to April.

The CBN deployed direct dollar sales to authorised banks as a key strategy to contain short-term volatility. While this approach helped calm the market and steady the exchange rate, experts caution that without a sustained boost in dollar inflows, relying heavily on reserves may prove unsustainable.

“The CBN’s determination to support the naira is clear,” a market analyst noted, “but the sustainability of this strategy hinges on stronger reserve inflows.”

In a broader context of financial recovery, Nigeria settled all outstanding debts to the International Monetary Fund (IMF) by May 2025, having reduced its obligations from $3.54 billion in December 2020 to zero—an achievement widely seen as a boost to the country’s credit profile.

Investor confidence has also been lifted by Moody’s Investors Service, which upgraded Nigeria’s sovereign credit rating from Caa1 to B3 with a stable outlook. The ratings agency cited improved fiscal management, removal of fuel subsidies, exchange rate liberalisation, and stronger revenue collection under President Bola Ahmed Tinubu’s leadership. It also raised Nigeria’s local currency ceiling to Ba3 and foreign currency ceiling to B2, reflecting enhanced economic fundamentals.

Further supporting the FX market, remittance inflows have surged. Official data shows that diaspora remittances through International Money Transfer Operators (IMTOs) grew by 44.5% in 2024, hitting $4.76 billion—up from $3.30 billion the previous year.

Despite these positive trends, the parallel market continues to reflect persistent demand for foreign currency. The naira ended May at N1,617.50 per dollar on the unofficial market, down by N11 compared to the previous month.

While the CBN’s interventions have helped stabilise the naira in the short term, economists stress that deepening structural reforms and securing consistent foreign exchange inflows are essential for long-term currency stability.