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The Nigerian Naira has lost over 600% of its value against the US Dollar in the last decade, driven by oil dependency, inflation, forex shortages, and policy missteps.
? The Nigerian Naira’s Decade of Decline: Causes, Data, and Outlook
The Nigerian Naira (?) has faced one of the steepest depreciations among emerging-market currencies in the past ten years. From ?199 per USD in 2015 to ?1,450 per USD in 2025, the currency has lost more than 600% of its value A B. This dramatic fall has reshaped Nigeria’s economy, trade, and investment climate.
Exchange Rate Trend (2015–2025)
Key Reasons Behind the Naira’s Depreciation
1. Oil Dependency and Price Volatility
Nigeria earns over 80% of its foreign exchange from crude oil. When oil prices fell in 2015–2016 and again in 2020, forex inflows collapsed, weakening the Naira C D.
2. Forex Liquidity Shortages
The Central Bank of Nigeria (CBN) struggled to supply dollars to importers and investors, creating a parallel market where rates diverged sharply from official windows
3. Inflation and Excessive Government Spending
Persistent inflation (often above 15%) eroded purchasing power. Fiscal deficits and borrowing worsened the imbalance, fuelling currency weakness.
4. Policy Missteps and Devaluation Waves
Artificially pegged exchange rates delayed inevitable adjustments. In 2023–2024, reforms led to sharp devaluations, pushing the Naira past the ?1,000/$ mark for the first time.
5. Declining Foreign Reserves
Nigeria’s reserves, once above $60 billion in 2008, hovered around $44 billion in 2025 G H. Limited reserves constrained the CBN’s ability to defend the currency.
6. High Dollar Demand
Import dependence, capital flight, and speculative trading increased demand for USD, widening the supply-demand gap E.
Impact on Businesses and Citizens
Outlook for the Naira
Experts predict continued volatility, with the government setting a 2026 budget rate of ?1,512/$ JM. Diversification into non-oil exports, fiscal discipline, and forex market liberalization are critical to stabilizing the currency.
Conclusion:
The Nigerian Naira’s depreciation reflects deep structural challenges—oil dependency, inflation, forex shortages, and policy missteps. For businesses and individuals, understanding these dynamics is essential to navigating Nigeria’s evolving FX landscape.
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