CBN’s $580m FX market injection in May 2025 helped stabilise the naira, but analysts raise concerns over sustainability amid declining external reserves

[dropcap]N[/dropcap]aira stability boosted CBN efforts in May 2025 when the Central Bank of Nigeria injected $580 million into the foreign exchange market to counter growing pressure on the local currency.

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This came as the naira slipped to its weakest levels in the first half of the month, trading as low as N1,614 to the dollar.

By the end of May, the intervention had produced moderate gains, helping the naira close at N1,586.15 to the dollar.

Analysts observed that the CBN’s direct sales to authorised banks, along with inflows from exporters and foreign investors, restored some calm to a volatile market.

AIICO Capital Limited reported that the naira traded within a narrow band of N1,575 to N1,610 for most of May.

The 66-basis-point improvement over April levels is modest but notable, especially in a month that began with deep uncertainty.

Yet this temporary calm came at a cost. Nigeria’s external reserves dropped to $38.045 billion by the end of May, sparking concern among market experts.

Many argue that defending the naira with such large dollar outflows may be unsustainable if new foreign exchange sources are not secured.

“The CBN has shown its willingness to defend the naira,” said a market analyst. “But the concern remains: how long can it continue this level of support?”

Despite these challenges, Nigeria achieved key milestones that boosted investor confidence. The country fully cleared its $3.54 billion debt to the IMF by May, enhancing its creditworthiness and global financial image.

Moody’s Investors Service also upgraded Nigeria’s sovereign credit rating from Caa1 to B3 with a stable outlook.

The agency credited President Bola Tinubu’s reforms, including improved fiscal discipline, fuel subsidy removal, and better revenue collection. It also raised Nigeria’s local and foreign currency ceilings, indicating stronger fundamentals.

Remittance inflows have added further support. Figures from official sources show a 44.5% rise in funds sent through International Money Transfer Operators in 2024, totalling $4.76 billion.

This inflow helped cushion the pressure on external reserves and supported the CBN’s interventions.

Nevertheless, the parallel market tells a different story. Demand for dollars remains strong, and the naira closed May at N1,617.50 to the dollar in unofficial markets, down N11 from earlier levels.

Economists agree that while short-term stability has been achieved, Nigeria must not rely solely on interventions.

Also read: CBN sells $543.5 million to banks to reduce forex market volatility

The country needs long-term strategies that deepen structural reforms, boost non-oil exports, and attract sustained foreign direct investment. Only then can the gains in naira stability be secured beyond temporary relief.