The naira-dollar exchange rate is expected to remain stable until 2025 after stabilizing in the official foreign exchange (FX) market from July to December 2024.

Muda Yusuf, director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), expressed this positive expectation in a 2024 economic review and a 2025 forecast.

“The naira experienced a significant period of calm in the latter half of 2024, following a turbulent 18 months. Regulatory reforms and periodic interventions by the Central Bank of Nigeria (CBN) played a pivotal role in achieving this moderation in exchange rate volatility,” Yusuf explained.

The average rate was N907.1 in December 2023 and N1,455.59 in January 2024. By the end of the year, the official exchange rate at the Nigerian Foreign Exchange Market (NFEM) was N1,537.

This stability and a favorable forecast for 2025 are supported by a number of factors. Yusuf cited important advancements including Nigeria's foreign reserves surpassing $40 billion and predicted that reserve accretion would continue to grow.

“This progress is largely driven by increased inflows from International Money Transfer Operators (IMTOs) and robust diaspora remittances,” he said.

Furthermore, it is anticipated that actions such as the $2 billion Eurobond proceeds, a $500 million domestic dollar bond, and the CBN's resolution of $7 billion in legacy forex commitments will strengthen the central bank's ability to effectively operate in the forex market.

The influence of the newly operating Dangote and Port Harcourt refineries on import substitution is another game-changer.

“With these refineries easing the demand pressure on forex for fuel imports, the naira will benefit from reduced dependency on external currency flows,” Yusuf observed.

Additionally, he saw a slow but steady revival in the non-oil export industry, which may help boost foreign exchange inflows.

Inflation is predicted to drop marginally in 2025 after skyrocketing to 34.2 percent in November 2024. Yusuf explained this likely easing by pointing to a decrease in exchange rate volatility, changes in geopolitics since Donald Trump took office again, and a potential stabilization of the world's oil markets.

“The rebound of the naira and the easing of energy costs could provide much-needed relief to the inflation trajectory,” he said. Additionally, the base effect of elevated inflation in 2024 could make 2025 figures appear comparatively moderate.

Yusuf warned that some inflationary pressures might still exist in 2025 despite these hopeful forecasts.

“Challenges such as high energy costs, transportation expenses, and insecurity affecting agricultural output will continue to influence the inflation landscape. Climate change, flooding, and global supply chain disruptions will also remain factors to watch,” he warned.