The Central Bank of Nigeria (CBN) has acknowledged the recent improvement in the country’s inflation figures, viewing it as evidence that its monetary tightening (backed by supportive fiscal measures) is beginning to bear fruit. On May 15, 2025, the National Bureau of Statistics (NBS) reported a decline in headline inflation to 23.7% in April, down from 24.2% recorded in March.
Though modest, this drop marks a notable turning point in Nigeria’s inflation trajectory, signaling that the tools of economic management may finally be catching up with the persistent rise in prices.
The central bank’s hawkish stance has been one of the core levers pulling inflation down. By tightening monetary policy through higher interest rates and liquidity controls, the CBN has worked to curb demand and anchor inflation expectations. This effort has been complemented by easing fuel prices, which have helped relieve some of the cost pressure on transportation and goods. Additionally, food inflation (which traditionally carries significant weight in Nigeria’s inflation basket) has been on a decline. However, under the NBS’s new methodology introduced in 2025, food prices now have a reduced influence on the overall inflation figure. This recalibration was evident in March’s data, where even a substantial drop in food inflation failed to significantly drag down headline inflation.
That said, the influence of fiscal policy in shaping these outcomes should not be overlooked. The federal government has taken deliberate steps to boost agricultural output, including incentivizing farmers, strengthening support for the sector, and enhancing security in food-producing states. These interventions are beginning to pay off. As food production stabilizes and supply chains improve, the growth in food prices has started to ease, and further progress in these areas could lead to continued disinflation.
Meanwhile, developments in the energy sector have also helped to ease inflationary pressure. With the naira-for-crude exchange mechanism still in place and the Dangote Refinery steadily expanding towards full capacity, domestic fuel supply has improved, reducing Nigeria’s exposure to volatile import prices. Despite a recent rebound in global oil prices, its outlook remains somewhat bearish. An expected rise in output from non-OPEC countries, the possibility of increased OPEC production, and potential de-escalation of geopolitical tensions (particularly in the Russia-Ukraine conflict) could all work to stabilize or even lower crude oil prices. There’s also speculation that the U.S. may reconsider its sanctions on Iran, which would further boost global oil supply, though such a move remains uncertain.
These global and domestic factors are feeding into Nigeria’s monetary transmission mechanism, reinforcing the impact of policy rate adjustments and helping to soften price pressures. Coupled with the rebase effect from the updated inflation methodology, they point to a cautiously optimistic path forward. While risks remain, the convergence of firm monetary control and pragmatic fiscal initiatives is beginning to chip away at the country’s inflation problem, offering some relief to households and businesses alike.
Exchange Rate Under Pressure: How CBN’s Reforms Are Cushioning the Naira Amid Global Volatility
The Nigerian naira has experienced a turbulent journey in 2025. After beginning the year on a strong note, it has since come under significant pressure, depreciating from ₦1,475/$ at the end of January to ₦1,598/$ as of May 19. While the decline is notable, especially over such a short span, a broader comparison with 2024 paints a more tempered picture, the naira has shown relative resilience in the face of global headwinds and domestic pressures.
Part of the recent strain on the naira has stemmed from sustained local demand for foreign exchange, which continues to outpace supply. However, this is only one side of the story. The more substantial pressure has come from abroad, as foreign investors have pulled back from Nigerian markets, mirroring a wider trend among emerging economies.
A global risk-off sentiment, spurred by rising geopolitical tensions, trade uncertainties, and ongoing tariff disputes, has triggered a flight to safety. As investors rush to safer assets, particularly in developed markets, many riskier currencies, including the naira, have borne the brunt of capital flight.
Ironically, while global uncertainty has led to a softening of the U.S. dollar, which should have supported emerging market currencies like the naira, this theoretical advantage failed to materialize. The simultaneous withdrawal of foreign portfolio investors and persistent local demand for FX more than offset any potential benefits from a weaker dollar. This dual pressure kept the naira under strain, despite a seemingly favorable global backdrop.
In defending the naira’s performance, CBN Governor Yemi Cardoso argued that Nigeria’s currency fared better than many peers during this period of uncertainty. However, an independent review of a sample of nine representative emerging market currencies showed that the naira’s performance was less impressive than the CBN’s narrative suggested. While it didn’t collapse, it also didn’t outperform its peers as significantly as claimed.
Despite this, there’s a silver lining: the CBN’s foreign exchange reforms are clearly yielding results. One of the most notable successes has been the reduction in exchange rate volatility. Although the naira has depreciated, it has done so in a more orderly and predictable manner. The gap between the official and parallel market rates remains narrow, a significant departure from the sharp discrepancies seen in previous years. Daily fluctuations in the exchange rate have also moderated significantly when compared to 2024, signaling growing market confidence and increased transparency in FX operations.
This improved stability is not just a statistical detail, it matters deeply to investors. Exchange rate volatility is a major risk consideration for foreign investors looking to enter any emerging market. As Nigeria continues to rein in this volatility, it enhances its attractiveness as a destination for foreign capital. Should these reforms persist and deepen, they may lay the groundwork for a more sustainable and investment-friendly FX environment, potentially setting the stage for renewed inflows and a more stable naira in the long run.
Reserves Rebound and Reforms Gain Ground: CBN Signals Stability Amid Global Uncertainty
After a challenging start to the year, Nigeria’s external reserve position has begun to show signs of recovery—an encouraging development that reflects not only changing market dynamics but also the Central Bank of Nigeria’s (CBN) strategic efforts to restore confidence in the economy. While early 2025 saw some drawdown in the reserves due to heightened demand for foreign exchange—driven by debt servicing obligations, import-related FX needs, and direct CBN interventions—the tide began to turn from late April. As of May 16, Nigeria’s external reserves stood at approximately $38.9 billion, a level the CBN notes is sufficient to cover 7.6 months of imports for goods and services.
This turnaround in reserve accumulation coincided with a major vote of confidence from the international financial community. In April, Fitch Ratings upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating from ‘B-’ to ‘B’, maintaining a stable outlook9. What makes this upgrade especially significant is its timing—coming at a moment of intense global uncertainty, with rising U.S. tariffs and widespread investor caution clouding emerging markets. That Fitch proceeded with an upgrade under such conditions sends a powerful message: Nigeria’s ongoing economic reforms are being taken seriously. This recognition has not come from Fitch alone; several external institutions have similarly acknowledged Nigeria’s improving macroeconomic outlook.
A key pillar of this restored confidence lies in the CBN’s effort to improve transparency and credibility, particularly among foreign investors who have long harbored concerns about data opacity and policy unpredictability. In a major move, the CBN fulfilled its promise to release data on Nigeria’s Net Foreign Exchange Reserves (NFER), revealing a position of $23.11 billion at the end of 2024, up sharply from $3.99 billion at the close of 202310. Alongside this, the CBN also broke a long silence by publishing its annual financial statements, signaling a renewed commitment to institutional accountability. The apex bank’s financial health also appears to be improving, with a turnaround from a ₦1.16 trillion loss in 2023 to a ₦38 billion profit in 202411. These developments are critical steps toward bridging the trust deficit and reinforcing the bank’s credibility both locally and internationally.
Looking ahead, the CBN has set an ambitious but strategic target: to attract $1 billion in net foreign inflows each month. Several initiatives have already been rolled out to support this goal. Among the most notable is the launch of the Non-Resident Bank Verification Number (NRBVN) platform, which allows Nigerians in the diaspora to register for a BVN remotely, without requiring physical presence in Nigeria. This measure complements earlier innovations introduced in January, such as the Non-Resident Nigerian Ordinary Account (NRNOA) and the Non-Resident Nigerian Investment Account (NRNIA). These channels are designed to facilitate diaspora participation in the economy, streamline investment inflows, and promote remittance growth.
CBN is also in active discussions with the World Bank to reduce the high cost of remittances into Africa, another potentially transformative measure. If successful, it would not only improve the efficiency of remittance channels but also unlock additional liquidity and support for households across the country.
In sum, Nigeria’s external reserve recovery, improved transparency, stronger institutional signaling, and bold foreign exchange reform agenda are beginning to pay dividends. While challenges remain, especially in a volatile global environment, the current trajectory suggests a central bank focused on restoring macroeconomic stability, attracting capital, and strengthening the naira’s resilience in the face of uncertainty.
Conclusion
Taken together, Nigeria’s recent macroeconomic performance tells a story of a country navigating through turbulence with a clear, reform-driven compass. Inflation is easing, not by chance, but through a deliberate mix of tight monetary policy and complementary fiscal interventions. The naira, though tested by global and domestic forces, has avoided the kind of chaos once feared thanks in large part to targeted CBN reforms that have restored a measure of stability and reduced volatility. Meanwhile, the rebound in external reserves, improved transparency from the apex bank, and a renewed push to engage the diaspora are laying the groundwork for sustainable capital inflows and a more resilient economic structure.
This is not just a moment of recovery, it is a moment of recalibration. Nigeria is proving that with disciplined policy, institutional accountability, and strategic vision, even the most daunting economic challenges can be met with confidence. The road ahead may still be complex, but the direction is finally pointing toward progress—and the world is beginning to take notice.
