Summary – Dollar shortages that once crippled trade and investment are easing, thanks to sweeping reforms by the Central Bank of Nigeria. From manufacturers to bankers, confidence is creeping back into the economy. But is this newfound liquidity here to stay, or just a fragile calm before another storm?
Two years after Nigeria floated its currency, signs of recovery are beginning to emerge in an economy long stifled by chronic dollar shortages, offering businesses a long-awaited sigh of relief.
The prolonged scarcity of U.S. dollars, which had hamstrung trade and investment decisions, appears to be easing. Dollar liquidity has improved markedly following the Central Bank of Nigeria’s (CBN) decision to float the naira and introduce a series of market-based reforms, stabilising the foreign exchange (FX) market and restoring investor confidence.
On June 14, 2023, the CBN dismantled its multi-tiered exchange rate system, officially floating the naira to allow market forces to determine its value. The move ended years of tightly managed currency regimes and marked a significant shift toward transparency.
The immediate aftermath was painful. The naira plunged amid pent-up demand and years of undersupplied FX markets. By March 8, 2024, it had depreciated to a record low of N1,627.40 per dollar in the official market. But that slide has since moderated as liquidity conditions improved and investor sentiment turned cautiously optimistic.
A turning point came in December 2024, when the CBN mandated the use of Bloomberg’s BMatch system for all interbank FX transactions, bolstering transparency and price discovery. Since the start of 2024, FX inflows have consistently outpaced outflows. By 2025, monthly average FX turnover surged to $8.1 billion, up from $5.5 billion the previous year, according to the CBN data.
The naira closed at N1,549.35 per dollar on Friday at the Nigerian Foreign Exchange Market, a mild 0.6 percent decline from N1,539.72 the day before. In the parallel market, the naira held steady at N1,605– a signal that formal FX access has improved.
Despite a slight dip, Nigeria’s external reserves remain resilient. As of June 11, 2025, reserves stood at $38.02 billion, down marginally from $38.04 billion the previous day.
“It’s a free market. You can export and generate your own dollars. That’s why we are encouraging small businesses to become export-oriented,” said Sola Obadimu, director general of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA).
Muhammad Sani Abdullahi, CBN’s deputy governor for economic policy, cited stronger turnover, early signs of disinflation, and gradual reserve accumulation as evidence of the reforms’ success.
“With a market-determined exchange rate and a transparent, rules-based policy framework, confidence is gradually being restored in Nigeria’s economy,” he said.
For business owners like Michael Iweka, a mid-sized manufacturer, the reforms have meant better but still limited access to dollars, mainly through the parallel market. Yet macroeconomic sentiment is lifting. A May 2025 CBN survey showed that business optimism remains high, with a confidence index of 18.7 points.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, noted that the naira float has significantly deepened FX liquidity. “More inflows are now coming from autonomous sources rather than the CBN,” he said. “Though the first year was turbulent, the market is becoming more transparent, investor confidence is rising, and dollar shortages are easing.”
Yusuf contrasted the current environment with that of the previous administration, when businesses struggled to access dollars and net reserves dipped below $5 billion. Today, net reserves hover around $23 billion and the CBN has cleared roughly $8 billion in outstanding FX obligations.
He also flagged legacy issues–from opaque currency swap deals to the securitisation of reserves–that the CBN is now confronting. Still, he warned that structural bottlenecks such as low productivity, high operating costs, and food and energy inflation could blunt the benefits of reform.
Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., said the ‘willing buyer, willing seller’ model introduced alongside the float has improved FX access for businesses willing to pay market rates. While volatility remains, he argued that predictable access matters more to companies than fixed rates. “If the CBN reverts to rate control, the market will seize up again,” he warned.
Ayodele Akinwunmi, senior relationship manager at FSDH Merchant Bank, confirmed that more FX needs are now being met through formal banking channels. He credited the CBN’s transparency and steady policy direction with curbing capital flight and attracting inflows. “The CBN has demonstrated leadership. People are now more confident,” he said.
Akinwunmi pointed to declining FX demand as a factor supporting market balance. For example, Dangote Fertilizer exports more than 70 percent of its output, reducing pressure on domestic dollar demand.
Foreign exchange inflows from international money transfer operators (IMTOs) have also surged. According to the CBN’s statistical bulletin, IMTO remittances rose to $4.76 billion in 2024, up 44.5 percent from $3.30 billion in 2023. These inflows remain a crucial source of household and business liquidity.
That growth wasn’t linear. Inflows from September to December 2024 showed seasonal swings: a 40.8 percent year-on-year jump in September ($336.61 million), followed by a 29.1 percent rise in October ($378.85 million), a 22.1 percent dip in November ($252.28 million), and a 9.1 percent rebound in December ($316.59 million).
Observers tie this uptick in FX inflows to the CBN’s reform-minded leadership under Governor Olayemi Cardoso, who assumed office in September 2023. Since then, the bank has prioritised transparency, liberalisation, and market confidence.
Still, Nigeria’s FX market remains fragile. The economy is vulnerable to external shocks due to its import dependence, limited non-oil FX sources, speculative behavior, and historically thin formal FX liquidity.
In line with its broader reforms, the CBN has adopted inflation targeting as a core pillar of its monetary policy, a break from its earlier reliance on managing money supply.
In March 2024, the central bank announced the clearance of a $7 billion FX backlog, widely seen as a major trust-building measure. The move reassured foreign investors and commercial banks, improved dollar supply, and helped restore credibility to Nigeria’s external accounts.
