Infostride News projects a weakening of Nigeria’s official exchange rate to N1,068.3/$ by 2025, according to a comprehensive report by the Economist Intelligence Unit (EIU). The report unveils concerns about the Central Bank of Nigeria’s (CBN) ability to handle a $6 billion forex backlog, pointing to a lack of firepower and experience in conducting a foreign currency float, ultimately leading to a pessimistic outlook for the naira.
In the freshly released country report for Nigeria, the EIU highlights the persistent currency losses driven by the sizable parallel market and the country’s low foreign exchange reserves. The report anticipates a more significant devaluation in 2025, reflecting the widening gap between official and parallel-market exchange rates. The revised exchange-rate forecast stands at N1,068.3:US$1, up from the previous N914.4:US$1, with an expectation of another attempt at exchange-rate convergence in that year.
The EIU emphasizes that the larger devaluation might have limited pass-through effects, given the parallel market’s size. However, the average inflation forecast for 2025 has been adjusted upward by two percentage points, from 15.1% to 17.1%. This underscores the challenges Nigeria faces in managing its exchange rate and inflation dynamics.

Nigeria has grappled with foreign exchange illiquidity, contributing to an inability to clear the forex backlog and exacerbating the devaluation of its currency. President Bola Tinubu has pledged to settle around $7 billion in unpaid foreign exchange commitments, aiming to ease the strain on the nation’s currency. The promise of increased foreign exchange liquidity, as declared at the 29th Nigerian Economic Summit in Abuja, is expected to address the challenges faced by the business sector.
Sources have confirmed that the CBN has initiated steps to fulfill its commitment to settle some of its FX liabilities with institutions such as Citibank, Stanbic IBTC, and Standard Chartered. While this move is expected to reduce the FX backlog and improve investor confidence, challenges persist in efficiently disbursing the FX.
Despite the CBN’s efforts, foreign airlines reveal that about 90% of their $783 million trapped funds are yet to be paid. This struggle is reflected in the recent decline of the naira to a new low, closing at N996.75 per dollar in the official market and N1,090 per dollar in the parallel market, underscoring the complexity of Nigeria’s forex situation.
The EIU’s analysis on Nigeria’s forex illiquidity points to a re-emergence of a wide (35%) spread between official and parallel-market exchange rates, attributed to the CBN’s reluctance to allow free access to hard currency. This, coupled with illiquidity in the Nigerian Foreign Exchange Market (NFEM), suggests that pressing for currency reform could necessitate a substantial devaluation.
The country report notes that additional demand in the formal market may face constrained supply due to the recent decision to eliminate import limitations on 43 imported commodities. Furthermore, the authorities’ perceived lack of willingness to implement orthodox monetary policies, such as addressing severely negative short-term real interest rates, adds to the challenges facing the naira.
According to the EIU, the CBN’s lack of firepower raises doubts about the success of a currency float over 2024-28. The inability to adequately supply the market or clear a significant backlog of foreign exchange orders, valued at over US$6 billion, is anticipated to keep foreign investors uneasy. The report foresees sizable devaluations in 2025, causing a 38.5% loss against the US dollar, with a projected exchange rate of N1,142.5:US$1 at end-December.
Despite these anticipated devaluations, the EIU does not foresee a lasting commitment to a market-led naira, citing the CBN’s lack of experience in conducting monetary policy under a float. The report predicts high inflation and continued divergence with the parallel market, resulting in periodic devaluations. The projected exchange rate at the end of 2028 is N1,262.1:US$1, with an expectation of an ongoing spread with the parallel market.
The exchange rate between the naira and dollar hit an all-time low at N996/$1 on Thursday, underscoring the challenges and uncertainties surrounding Nigeria’s currency situation. As Infostride News continues to monitor these developments, the complexities of the foreign exchange landscape in Nigeria remain a focal point of economic analysis and discussion.
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