CBN injects $580m into forex market to defend Naira in May

The gross balance in the external reserves reduced to $38.045 billion as data showed that the Central Bank of Nigeria (CBN) defended the local currency with $580 million in May, 2025. The aggressive FX intervention supported the naira’s gaining streaks but raised concerns over the long-term sustainability and negative effect on the external reserves. To ensure the stability of the naira amidst rising corporate demand for US dollars for foreign payments, the CBN has continued to sell FX to authorised dealer banks, revving up the inflows at the supply side. In May, the USD/NGN market traded on a volatile yet relatively stable footing, supported by steady FX interventions and improved liquidity, AIICO Capital Limited affirmed in a macro note released this week.
Analysts recall that early in May, declining oil prices and elevated FX demand pushed the pair to intraday highs of N1,614, but subsequent CBN interventions—totaling over $580 million across various sessions—helped moderate pressures. The investment firm also hinted that sporadic inflows from exporters and foreign investor participation further bolstered liquidity, facilitating intermittent naira appreciation. This was spurred by improved confidence, which was further highlighted the sovereign rating upgrade. Moody’s Investors Service upgraded Nigeria’s sovereign credit rating from Caa1 to B3 with a stable outlook, marking the second positive rating action under President Tinubu’s administration. The upgrade reflected substantial improvements in fiscal and external positions, driven by key reforms including fuel subsidy removal, exchange rate flexibility, and enhanced tax revenue collection.
The rating agency also raised Nigeria’s local currency ceiling to Ba3 and foreign currency ceiling to B2, acknowledging the Central Bank’s increased foreign exchange reserves and reduced fiscal pressures. The US dollar was quoted within the N1,575–N1,610 range last month, according to AIICO Capital Limited, with fixing rates fluctuating accordingly. The naira saw 66 bps month-on-month appreciation to N1,586.15 per dollar in May, while the parallel market weakened by N11 to N1,617.50/USD, reflecting persistent street-level FX demand. While occasional demand spikes tested the naira, improved market confidence and robust liquidity conditions kept the currency largely anchored, analysts said.
Recall Nigeria achieved a significant milestone in external debt management by fully settling its outstanding obligations to the International Monetary Fund, removing the country from the list of debtor nations. The IMF debt decreased from $3.54 billion in December 2020 to complete repayment by May 2025, representing a major improvement in fiscal credibility and investor confidence. This achievement coincided with sustained improvements in foreign exchange reserves, which increased by $364 million between April 30 and May 14, 2025, marking the first consistent two-week upward trend since January, according to AIICO Capital Limited. The external sector received additional support from International Money Transfer Operator inflows, which surged 44.5% to $4.76 billion in 2024 from $3.30 billion in 2023, the investment firm stated.