Naira falls to N2,200
The Nigerian naira has weakened to N2,200 per British pound in the unofficial market, reflecting increased buying pressure on foreign currencies, particularly the sterling. This month, the naira has remained within a tight consolidation range of N2,150 to N2,250/£, largely driven by high demand in Lagos and other commercial hubs.
The fall highlights ongoing pressure in Nigeria’s foreign exchange market despite ongoing reforms by the Central Bank of Nigeria (CBN) and renewed engagement with foreign investors.
Pound Demand Surges in Lagos, Driving Naira Volatility
Forex traders in Nigeria’s commercial capital report a surge in demand for the British pound. This demand has pushed the naira toward its lower bound in the parallel market, even as official market rates attempt to stabilize.
The weakening of the naira comes at a time when market participants are closely watching CBN’s monetary policies, investor confidence, and the country’s overall macroeconomic direction.
CBN Reforms and Foreign Participation Key to Stability
Currency analysts believe that recent monetary reforms introduced by the CBN will be instrumental in determining whether the naira can regain strength in the second half of 2025.
A notable development is the launch of global depositary notes (GDNs) denominated in naira, introduced by BNY Mellon in collaboration with Standard Bank. These instruments are backed by Nigerian sovereign debt and are designed to provide easier access for international investors to Nigeria’s high-yield fixed-income market.
The GDNs will be settled through Euroclear and Clearstream, two globally recognized clearing systems, which could significantly improve Nigeria’s integration into global capital markets.
Experts suggest that if successfully implemented, this development could bring foreign exchange inflows, ease liquidity constraints, and strengthen the naira over time.
British Pound Holds Firm Despite UK Economic Concerns
Meanwhile, the British pound has remained resilient against major currencies, including the US dollar. Despite a sharp 2.7% drop in UK retail sales in May—the worst since December 2023—the pound closed at 1.345 against the dollar, only slightly below the critical 1.35 resistance level.
Economists believe that the poor retail data may increase pressure on the Bank of England (BoE) to cut interest rates later in the year. However, high inflation remains the major obstacle to monetary easing.
Three members of the BoE’s Monetary Policy Committee (MPC) recently voted in favour of a 25 basis point rate cut, citing weak consumer demand, softening wage growth, and broader signs of labour market loosening.
Inflation Still Above Target as Rate Decisions Loom
According to the UK Office for National Statistics, the country’s annual inflation rate remained at 3.0% in May, while core inflation—which excludes food and energy—declined from 3.8% to 3.5%.
Although these figures align with expectations, they are still above the BoE’s 2% inflation target, suggesting that the central bank may take a cautious approach before adjusting interest rates.
UK Finance Minister Rachel Reeves acknowledged the government’s progress in stabilizing public finances but noted that “there is more to do,” a comment interpreted by markets as a signal of ongoing economic uncertainty.
Global FX Outlook: Euro Expected to Strengthen Against the Pound
Currency strategists at UBS forecast that the euro could gain strength against the pound in the coming months, potentially pushing the EUR/GBP rate toward 0.86. This forecast is based on the assumption that inflation will continue to weigh on UK consumer spending and sentiment.
The bank added that while geopolitical and trade tensions affect both currencies, they expect these headwinds to ease, leading to a more stable trading environment in the eurozone.
Dollar Weakness Provides Additional Support to the Pound
The British pound has also benefitted from the recent decline in the US dollar, driven by investor concerns over US fiscal policy and political uncertainty. With markets growing wary of the White House’s unpredictability, many investors have shifted capital toward the pound and euro, bolstering their value in the global market.
What This Means for Nigeria’s Currency Outlook
As the naira struggles to hold ground in the unofficial market, the combined influence of:
CBN’s reforms
Increased foreign investor access to Nigerian debt markets
Volatile global currency dynamics
…will play a critical role in shaping Nigeria’s foreign exchange outlook.
If the GDN initiative draws substantial investment, it could provide the foreign liquidity needed to stabilize the naira. However, if global risk sentiment worsens or demand for foreign currency continues to outpace supply, the naira could come under further pressure.
Conclusion
The naira’s fall to N2,200 per pound reflects the fragile balance between domestic monetary reform and global economic realities. While demand for foreign currency remains high, the success of initiatives like naira-denominated depositary notes, along with disciplined policy execution, could determine whether the local currency stabilizes or weakens further in 2025.
Market participants are advised to monitor exchange rates, policy signals from the CBN, and macroeconomic developments both in Nigeria and globally.
