The year 2025 is shaping up to be a year of hope or hubris for the Naira.
Optimists believe that after two years of wild swings, Nigeria’s currency might finally settle into something resembling stability.
The reasons are compelling enough: refineries coming online, reduced petrol imports, and an economy hungry to diversify beyond oil.
But let’s not pop the champagne just yet. A cocktail of domestic policy missteps and global economic shifts could send the Naira stumbling once more. Here’s what could go wrong.
If there’s one thing oil markets love, it’s drama—and a second Trump presidency could bring plenty of it. During his previous term, MAGA-era policies pumped U.S. domestic energy production, often at the expense of global crude prices.
If Trump returns to the White House, a glut in oil supply could hammer crude prices, squeezing Nigeria’s primary source of forex. True, local refineries are finally expected to reduce fuel import bills, but the math doesn’t work if export revenues collapse. Even an optimist would struggle to see how the Naira stays buoyant in such a scenario.
Then there’s the not-so-small matter of the U.S. economy. December 2024 Robust job numbers across the Atlantic have doused hopes for aggressive interest rate cuts by the Federal Reserve in 2025. If rates stay higher for longer, the dollar will remain strong, and emerging markets like Nigeria could face capital outflows. Investors, after all, like their returns where the grass—or, in this case, greenbacks—is greener. For the Naira, this means more pressure as dollars flee to safer pastures.
Inflation could play a spoiler too. While Nigeria’s inflation rate is forecasted to decline—finally—geopolitical shocks could upset that narrative. Global tensions, supply chain disruptions, or even a stray black swan event could keep prices stubbornly high. Worse, if inflation cools faster in the West than in Nigeria, expect inflation differentials to come into play, potentially forcing adjustments that don’t favor the Naira.
It’s no secret that Nigeria likes to live on the fiscal edge. The government’s spending plans for 2025 —heavy on infrastructure and military budgets—will require substantial borrowing. And while borrowing for growth is not inherently bad, excessive fiscal deficits often come with a side of currency devaluation. More naira in circulation, combined with a higher need for dollars to service debt, is a classic recipe for trouble.
Cryptocurrency enthusiasts and dollar hoarders may also take part in the action. In 2024, the growing appetite for stablecoins helped drive up dollar demand, adding fuel to the forex fire. A Trump presidency could reignite crypto interest, pushing Nigerians to seek more dollar-backed assets. As for local speculators? They’re unlikely to miss an opportunity to exploit volatility, especially if geopolitical tensions spike or oil prices falter.
And let’s not forget politics. Nigeria may not be heading to the polls until 2027, but political actors are already thinking ahead. By 2025, the hoarding of dollars for campaign war chests will likely be in full swing. Historically, these activities have a knack for distorting forex markets, adding another layer of complexity to the Naira’s fragile stability.
So, where does that leave us? The Naira could very well enjoy a respite in 2025—but only if everything goes right. That’s a big “if.” Oil prices need to hold firm, the Fed must pivot to lower rates, and Nigeria’s fiscal discipline has to improve (cue laughter). Meanwhile, policymakers will have to fend off speculators, manage inflation, and keep forex reserves intact—all while avoiding the temptation of yet another borrowing spree.
In short, 2025 could be the year the Naira finds its footing—or loses its balance entirely. Either way, it’s going to be one heck of a ride. Buckle up.