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Naira Fortitude: How CBN's Policy Shifts are Shaping the NGN/USD Exchange Rate in Oct - Omoseye Alebiosu - 10-06-2025 Naira Fortitude: How CBN's Policy Shifts are Shaping the NGN/USD Exchange Rate in October 2025 📈 The Naira Fortitude: How CBN's Policy Shifts are Shaping the NGN/USD Exchange Rate in October 2025 is the headline for a period of remarkable, albeit fragile, stability in Nigeria's foreign exchange (FX) market. As of early October 2025, the official Naira-to-Dollar exchange rate in the Nigerian Foreign Exchange Market (NFEM) is holding steady around ₦1,465.68 to $1 (as per the Central Bank of Nigeria's data). This marks a significant departure from the wild volatility witnessed in late 2024 and is largely a result of the Central Bank of Nigeria's (CBN) aggressive monetary tightening and fundamental reforms designed to boost liquidity and market confidence. The convergence of the official and parallel market rates, a major goal achieved earlier this year, remains a key indicator of the new market transparency. Market Dynamics: Stability Amidst Persistent Inflation The current stability of the NGN/USD rate in October 2025 is a direct outcome of coordinated monetary and fiscal policy. While the official rate hovers near the ₦1,465 mark, market participants are keeping a close eye on FX liquidity as the primary driver for sustained performance. Key FX Rate Data (Early October 2025) Metric Rate SourceOfficial NFEM Rate (USD) ₦1,465.68 (Approx.) Central Bank of Nigeria (CBN) Monetary Policy Rate (MPR) 27.00% CBN (as of late Sept. 2025) Inflation Rate (Year-on-Year) 20.12% (Approx.) CBN (as of late Sept. 2025) Export to Sheets Source: CBN Official Data The central bank's high Monetary Policy Rate (MPR) of 27.00% continues to be the primary tool to attract foreign portfolio investment (FPI) and combat persistent inflationary pressures, which stood at approximately 20.12% year-on-year in late September 2025. This high-interest-rate environment has made Naira assets more attractive to international investors, boosting dollar inflows and supporting the Naira's value. The Policy Pillars Sustaining Naira Strength The period between late 2024 and 2025 has been marked by a flurry of CBN reforms that have fundamentally restructured the Nigerian foreign exchange market. These measures are the bedrock of the current stability and their continued enforcement is vital for the Naira's future. 1. Market Unification and Transparency The convergence of the official and parallel market rates, achieved earlier in 2025, is a major success of the reform agenda. This unification was facilitated by the rollout of the Electronic Foreign Exchange Matching System (EFEMS), a centralised platform that ensures transparent pricing and execution of all eligible FX transactions. The goal is to eliminate the multiple exchange rate windows that previously fostered arbitrage and speculative trading. You can learn more about the mechanics of a unified market here. 2. The Nigerian Foreign Exchange (FX) Code Launched in January 2025, the Nigerian FX Code is a comprehensive set of guidelines aimed at fostering ethical conduct, professionalism, and integrity among authorised dealers and market participants. This code imposes stricter reporting requirements and mandates clear disclosure of conflict of interest, directly addressing historical issues of malpractices that plagued the market. This focus on governance is crucial for restoring investor confidence in Nigeria's financial ecosystem, a key factor in attracting sustained dollar inflows (see the CBN's overview of the FX Code). 3. Reform of Bureau De Change (BDC) Operations The CBN has effectively integrated Bureau De Change (BDC) operators back into the formal FX structure. This move, which includes allowing BDCs to purchase a specified weekly dollar cap (e.g., up to $25,000) from Authorised Dealer Banks (ADBs), is designed to enhance retail FX access for personal and business travel allowances, tuition, and medical expenses. Stricter compliance rules, including a maximum 1% profit margin above purchase price, and the mandatory collection of BVNs and international passport endorsements, aim to curb speculation and money laundering within the BDC segment. These changes were extended to May 2025, and their impact is still being monitored for a long-term, sustainable framework. For details on BDC regulations, refer to this [regulatory update on BDCs]. 4. Overhauling the Fixed Income Market Looking forward, the CBN is poised to assume complete control of the fixed income market from November 2025, governing both settlement and trading platforms. This ambitious overhaul aims to improve regulatory oversight and the transmission of monetary policy, which financial analysts anticipate will further solidify the FX stability by improving the management of Nigeria’s debt and treasury instruments. What This Means for Businesses and Investors The newfound FX stability in October 2025 carries profound implications for the Nigerian economy: For Importers and Manufacturers: The reduction in exchange rate volatility provides greater predictability for budgeting and financial planning, potentially easing the cost burden associated with importing raw materials. Companies with significant FX exposure are expected to benefit from reduced financial strain (read about the economic outlook for industrial sectors [here]). For Foreign Investors (FPI): Sustained stability, coupled with high interest rates and the successful clearing of foreign exchange backlogs from 2024, has significantly boosted investor sentiment. The first half of 2025 saw a substantial growth in total portfolio investment, signalling renewed trust in the Nigerian market. For Diaspora Remittances: Recent policies liberalising payout options, including the introduction of Naira payments based on the NFEM rate, have reportedly led to an increase in official remittance inflows, further bolstering the foreign exchange supply. The Road Ahead: Risks and Outlook While the current trend is positive, the CBN must navigate several persistent challenges to ensure the stability is not fleeting: Inflationary Pressure: Despite the decline in the headline inflation rate (in part due to CPI rebasing), food inflation remains a critical concern, driven by structural issues like insecurity and transport bottlenecks. Sustained monetary tightening will likely continue until inflation is firmly under control. Oil Price Volatility: As a major oil exporter, Nigeria remains vulnerable to global commodity price swings. Diversifying export earnings and increasing non-oil exports is a long-term necessity. Liquidity Management: The CBN's interventions to stabilize the market have, at times, led to a drawdown in FX reserves. Sustaining dollar liquidity through increased non-oil trade, FPI, and remittances is crucial to prevent a return to speculative pressure. In conclusion, October 2025 presents a cautiously optimistic picture. The CBN's structural reforms—particularly market unification, the FX Code, and BDC regulation—have engineered a period of exchange rate calm. Investors and citizens are now watching closely to see if the fiscal authorities can complement these monetary efforts with productivity-enhancing reforms to ensure the Naira’s fortitude is permanent. #NairaToDollar #CBNPolicy #NigerianEconomy #ForexMarket #FXStability #NigeriaBusiness #EconomicReform #NGNUSD Watch: An Insightful Discussion on Nigeria's Financial Market Reforms