The Nigerian naira has suffered another round of depreciation as foreign exchange outflows continue to surge. This downturn is largely attributed to global trade tensions involving the United States, Canada, Mexico, the European Union, and China. The ongoing tariff disputes have triggered uncertainty among investors, leading to a significant withdrawal of foreign capital from Nigeria’s financial markets.
Data from the Central Bank of Nigeria (CBN) reveals a sharp 78% increase in forex outflows in January, translating to an outflow of N45.45 billion in dollar terms. This exodus of capital has put immense pressure on the naira, causing it to weaken further against the US dollar.
Foreign Investors Pull Out, Naira Takes a Hit
The prolonged global trade war has heightened uncertainty, prompting many investors to exit Nigeria’s financial landscape. As a result, the naira has been on a two-week losing streak, forcing the CBN to intervene in the forex market. Last week, the apex bank injected approximately $500 million to stabilize the currency. However, the move did little to halt the depreciation, as the naira continued its downward trend, dropping by N55 to trade at N1,600 per dollar in the parallel market—the lowest level recorded since February 5, 2025.
In the official Nigerian Foreign Exchange Market (NFEM), the currency weakened by N6, settling at N1,548 per dollar. The uncertainty surrounding global trade policies, especially retaliatory tariff measures by China, Canada, Mexico, and the EU, has contributed to the instability in Nigeria’s forex market.
Investors Exit the Stock Market Amidst Rising Concerns
Market experts believe fear of further naira depreciation has led to panic sell-offs, compounding the pressure on foreign exchange demand. According to data from the Nigerian Exchange Limited (NGX), foreign investment outflows from the stock market surpassed inflows by 78% in January. The market recorded an N45.85 billion capital outflow, significantly higher than the N25.66 billion foreign inflow during the same period.
Further analysis indicates that forex outflows increased by 13.2% to N45.85 billion in January, compared to N40.49 billion in December. Conversely, foreign inflows dipped by 2.3%, declining from N26.26 billion in December to N25.66 billion in January. This widening gap has contributed to a severe dollar shortage, fueling continuous depreciation of the naira.
Between February 26 and March 14, the naira declined by 7.4% in the parallel market, falling from N1,490 to N1,600 per dollar. Similarly, the currency weakened in the official market by 3.3%, dropping from N1,499 to N1,548 per dollar.
Banks Accused of Forex Hoarding
Amidst the naira’s struggle, Bureau de Change (BDC) operators have pointed fingers at commercial banks, accusing them of withholding forex supply. Many BDC operators claim banks are either refusing to sell foreign currency or offering unfavorable exchange rates, further exacerbating the situation.
Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), expressed concerns over the limited availability of forex, stating that many banks have been reluctant to release foreign currency at competitive rates. He noted that the tight forex supply has led to currency substitution and speculative trading, further weakening the naira.
Naira Faces Its Steepest Decline in Months
In a historic drop, the naira recently hit its lowest level across all forex markets within a 24-hour period. In the NFEM, the currency fell from N1,546 to N1,549 against the dollar, marking the biggest single-day depreciation in March 2025. This trend underscores the persistent demand for the US dollar, putting additional strain on Nigeria’s forex reserves.
With global economic uncertainties and rising forex outflows, the naira’s stability remains uncertain. Analysts suggest that without significant policy interventions and improved forex liquidity, the Nigerian currency may continue to face downward pressure in the coming months.
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