The first Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) in 2025 provided critical insights into the country’s economic direction. The CBN reaffirmed its commitment to ensuring stability in the foreign exchange (FX) market, achieving inflation moderation, and driving economic recovery through a well-coordinated monetary and fiscal policy approach.
Over the past two years, several policy interventions have yielded visible results, including enhanced exchange rate convergence, increased investor confidence, and a boost in Nigeria’s Gross Domestic Product (GDP).
However, despite these positive developments, challenges remain. Inflation, while showing signs of moderation, is still well above the single-digit target, and structural economic constraints persist.
The recent MPC meeting highlighted the need for sustained reforms, better fiscal-monetary policy coordination, and continued engagement with stakeholders to consolidate the gains achieved so far, especially exchange rate stability and market convergence which industry watchers say are key achievements.
One of the most notable successes in recent months has been the increased stability in Nigeria’s FX market. The CBN’s strategic policy interventions have led to a narrowing of the gap between the official Nigerian Foreign Exchange Market (NFEM) rate and the Bureau de Change (BDC) parallel market rate.
Previously, that disparity had been a major concern for investors and businesses, often leading to speculative activities and market distortions.
Economic experts, including managing director of Financial Derivatives Company, Bismarck Rewane, have lauded the CBN’s efforts. Speaking on an Arise Television interactive programme in a post MPC analysis, Rewane noted, “The difference between the official and parallel market rates has dropped to less than 1%. It was previously as much as 10, 15, and 20%. This is a clear indication that the policies are working.”
At the heart of this exchange rate convergence is the introduction of the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code. These measures have strengthened transparency, improved price discovery mechanisms, and eliminated shadowy market actors such as Aboki FX, which previously influenced parallel market rates.
As of February 2025, the Naira was trading at ₦1,503.63 per dollar in the official market and ₦1,500.00 per dollar in the parallel market.
Rewane further explained that a Purchasing Power Parity (PPP) analysis places the fair value of the Naira at ₦1,102.15 per dollar, meaning that the currency remains undervalued by 26.35%. He emphasized, “If you intervene to protect an overvalued currency, that is bad. But if you intervene to support an undervalued currency, you’re actually bringing the currency back from misalignment to alignment. That is what the CBN is doing, and we applaud them.”
In addition to exchange rate management, increased oil production levels—1.54 million barrels per day (mbpd) as of January 2025—have positively impacted Nigeria’s current account position. This has helped strengthen external reserves, currently at $39.4 billion, providing 9.6 months’ import cover for goods and services.
According to the MPC, these measures have significantly improved investor confidence, leading to an anticipated rise in foreign direct investment (FDI), portfolio inflows, and diaspora remittances in the coming months.
Despite progress in stabilizing the FX market, inflation remains a major concern. The latest data from the National Bureau of Statistics (NBS) shows that Nigeria’s headline inflation rate stood at 24.48 percent (year-on-year) in January 2025, while food inflation was 26.08 percent and core inflation 22.59 percent.
The CBN has implemented several monetary policy measures aimed at reducing inflationary pressures. These include increasing the monetary policy rate (MPR) and strengthening monetary policy transmission mechanisms.
However, structural challenges such as high import costs, insecurity in agricultural regions, and supply chain disruptions continue to exert upward pressure on inflation. Many have asked the federal government to adopt both kinetic and non kinetic approaches to end insecurity in the country. Some have even argued that beyond portfolio investments, insecurity would make it difficult to attract reasonable rate of foreign direct investments (FDIs) as long as insecurity is not reduced to insignificant levels.
Like Rewane, Umeje Chukwuma observed that the rising cost of food is one of the biggest contributors to inflation. He noted, “Food inflation remains stubbornly high due to factors such as insecurity, logistical bottlenecks, and climate-related challenges affecting agricultural output. Unless these issues are addressed, bringing inflation down to a single-digit level will be difficult.”
The MPC has emphasized that improved collaboration between monetary and fiscal authorities is critical in achieving inflation moderation.
The recently concluded monetary policy forum highlighted the need for targeted fiscal interventions, including increased investments in agricultural infrastructure, enhanced security measures for farming communities, and incentives to boost local production.
The government’s efforts to discourage imports and promote local manufacturing have also played a role in inflation management. The MPC noted that Nigeria’s trade balance has improved significantly, with a current account surplus of $6.06 billion as of Q3 2024, signaling a reduction in import dependence and an increase in export earnings.
Nigeria’s economy has shown resilience, with Gross Domestic Product (GDP) growth exceeding expectations. According to the NBS, GDP expanded by 3.84 percent year-on-year in Q4 2024, up from 3.46% in Q4 2023. The services sector played a dominant role in this growth, recording a 5.37% increase and contributing 57.38% to aggregate GDP.
Financial analysts believe that Nigeria’s non-oil sector diversification efforts are beginning to yield positive results. The services, telecommunications, and fintech industries have seen significant expansion, helping to offset some of the weaknesses in the oil sector. However, analysts caution that the economy still faces structural challenges that could hinder sustained growth.
CEO of Economic Associates, Dr. Ayo Teriba, explained, “Nigeria’s economy is diversifying, but growth remains fragile. The oil sector still plays a crucial role, and fluctuations in global oil prices or production setbacks could impact macroeconomic stability.”
While Nigeria’s recent macroeconomic improvements are commendable, the sustainability of these gains is still a matter of debate. Experts have outlined several factors that could shape economic outcomes in the coming months:
The resilience of Nigeria’s external reserves and FX market stability is closely tied to global oil prices. Any sharp decline in oil prices could reverse recent gains, leading to renewed pressure on the Naira.
Issues such as poor infrastructure, power supply deficiencies, and agricultural sector vulnerabilities remain key constraints. Without addressing these bottlenecks, inflation control and long-term growth could be difficult to sustain.
Many expert say policy implementation will be a key determinant of success. Rewane emphasized the need for consistency, stating, “Frequent policy reversals create uncertainty and deter investors. The CBN must ensure that its FX and monetary policies remain predictable and transparent.”
The expansion of non-oil sectors, particularly manufacturing, agriculture, and technology, will be vital in reducing Nigeria’s dependence on oil revenues. Dr. Teriba added, “Policymakers must continue to support the growth of value-added industries to ensure sustainable economic diversification.”
The MPC meeting has reaffirmed the CBN’s commitment to achieving exchange rate stability, inflation moderation, and sustained economic recovery.
However, MPC and the experts share the believe that achieving a single-digit inflation rate and long-term economic resilience will require a balanced approach that includes: Sustaining the reforms that have enhanced price discovery and investor confidence; tackling insecurity and infrastructural deficits to support local production; and deepening Fiscal-Monetary Policy Coordination – Ensuring that both arms of policy work in harmony to address inflation and macroeconomic stability.
Some people are of the view that Nigeria should deliberately encourage foreign and domestic investments by creating an enabling environment for businesses and investors to thrive.
While Nigeria’s economic outlook has improved, sustained policy efforts and long-term strategic planning will be crucial in consolidating these gains and ensuring stability in the years ahead.
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