Naira Appreciates Against Dollar as CBN Announces New Interest Rate

• The Central Bank of Nigeria (CBN) kept the Monetary Policy Rate at 27.5%, leading to a 0.5% appreciation of the naira against the US dollar
• Foreign exchange inflows rose significantly to $914 million last week, boosting market activity and increasing Nigeria’s gross foreign reserves to $38.34 billion
• CBN Governor Olayemi Cardoso highlighted reduced currency volatility and improved macroeconomic stability as signs of growing confidence in the Nigerian economy

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

As the Central Bank of Nigeria (CBN) decided to keep the Monetary Policy Rate (MPR) at 27.5%, the value of the naira increased by 0.5% against the US dollar.

According to BusinessDay reports, data from the Nigerian Foreign Exchange Market (NFEM) on Tuesday, May 20, 2025, indicated that the local currency closed at N1,590.45 per dollar, representing a gain of N8.23 over the rate of N1,598.68 the previous day.

Street merchants quoted the dollar at N1,620, and the naira traded steadily in the parallel market despite the increase in the official window.

One trader remarked, “There hasn’t been much movement on the street rate, but there’s growing optimism with what the central bank is doing.”

As foreign exchange inflows increased significantly to $914 million last week from $619 million the week before, market activity at the NFEM demonstrated strong momentum. The research department at Coronation Merchant Bank reported that this amounts to a 47.66% weekly rise.

More analysis on naira and CBN's policies

According to a thorough analysis of the sources of inflows, foreign portfolio investors made up 12.53 per cent of the total, while the CBN provided 25.41 per cent. Exporters contributed 20.79 per cent, non-bank corporates contributed 28.85 per cent, and the remaining 12.42 per cent came from other sources.

In addition to better inflows, Nigeria's gross foreign reserves increased by 0.55% over the course of the week, ending at $38.34 billion as of 16 May 2025. Additionally, the naira saw a slight increase of 0.02 per cent against the Chinese yuan, finishing at N221.77 to one yuan.

Following the two-day meeting of the Monetary Policy Committee, CBN Governor Olayemi Cardoso assured reporters on Tuesday that all significant monetary parameters remained unchanged.

He clarified that the necessity to maintain macroeconomic stability guided the decision, emphasising that recent changes have begun to produce favourable results.

According to him, “Volatility in the foreign exchange market has declined significantly, falling below 0.5 per cent as our monetary and fiscal reforms begin to stabilise the macroeconomic environment.”

The naira had only slightly depreciated throughout recent global economic difficulties, and Cardoso credited its relative stability to timely reforms and stronger buffers, pointing to the decrease in currency rate volatility as an indication of increased confidence in the Nigerian economy.

“If you look at the exchange rate, volatility has reduced from over 4 per cent a year ago to less than half of 1 per cent now. That’s an indication of stability,” he said.

He also emphasised that the country now has “a relatively more competitive currency.” In the previous week, the naira had gained 0.46 per cent against the US dollar in the official spot market, closing at N1,598.72 per dollar after three weeks of consistent losses.

“Forward market rates also showed movement, with the one-month forward closing at N1,636.05, the three-month contract at N1,700.59, the six-month contract at N1,793.67, and the one-year forward rate at N1,972.22 per dollar. However, in the parallel market, the naira slipped slightly, losing 0.12 per cent to close at N1,627 per dollar on Friday,” the report indicated.

Elumelu speaks on expectations for naira

Legit.ng earlier reported that Nigerian business mogul Tony Elumelu explained that the newfound stability of the naira was a major boost for investors and business owners in Nigeria.

Speaking at the Qatar Economic Forum on Tuesday, May 20, the chairman of United Bank for Africa (UBA) expressed optimism about the naira's recent performance.

Elumelu, who is also the biggest shareholder of Transnational Corp. of Nigeria Plc, spoke on the importance of a stable currency.

Proofreading by James Ojo, copy editor at Legit.ng.

Source: Legit.ng