The Central Bank of Nigeria (CBN) intensified its efforts to stabilize the naira and curb inflation by withdrawing N1.7 trillion from the financial system through Open Market Operations (OMO) auctions in March 2025, according to a new report by Afrinvest Research.
The report highlighted that despite these significant liquidity tightening measures, the Nigerian currency continued to face downward pressure. The naira depreciated by 2.4% at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, closing at N1,536.82 against the US dollar. In the parallel market, the naira also weakened by 2.6%, closing at N1,530.00 per dollar.
Further illustrating the naira’s struggles, daily trading figures on Friday showed the local currency weakening by N5 in the black market, quoted at N1,565 per dollar compared to N1,560 the previous day.
The Afrinvest report also noted a slight dip in Nigeria’s external reserves, which declined by 0.2% in March to end the month at $38.3 billion.
The official market also witnessed a notable depreciation on Thursday, a day after United States President Donald Trump announced an increase in global trade tariffs. Data from the CBN revealed that the naira fell by N20.75 or 1.3%, closing at N1,552.53 per dollar compared to N1,531.25 on Wednesday. The parallel market mirrored this trend, with the naira losing N5 to close at N1,560.
Looking ahead, Afrinvest analysts predict a potential surge in global oil prices in April. This forecast is based on factors such as Trump’s new 25.0% tariff on Venezuelan crude buyers, representing 1.3% of global supply, and escalating geopolitical tensions involving Iran and Russia.
However, despite the anticipated rise in oil prices and a likely recovery in Nigeria’s domestic oil production following repairs to the Trans-Niger Pipeline (TNP), Afrinvest anticipates continued pressure on Nigeria’s foreign exchange reserves.
The report also pointed to the suspension of the Naira-for-Crude initiative and the increasing demand for FX from local refineries and Premium Motor Spirit (PMS) importers as factors that could further strain the naira in the near term, barring any unforeseen major developments.
In the money market, average system liquidity decreased significantly by 43.9% month-on-month in March 2025, falling to N735.1 billion from N1.3 trillion. While inflows from primary market repayments and the Standing Lending Facility (SLF) exceeded outflows from primary market sales, the Standing Deposit Facility (SDF), and OMO sales, the Open Repo Rate (OPR) saw a slight increase, while the Overnight (OVN) rate declined.
CBN Absorbs N1.7 Trillion in March to Combat Naira Volatility
