Recent reforms by the Central Bank of Nigeria (CBN) are said to be yielding tangible results, driving down inflation, stabilising the foreign exchange (FX) market, and boosting the nation’s external reserves to $37.93 billion as of July 18, 2025.
According to Lagos-based financial analysts, these measures, part of a broader macroeconomic strategy, are helping to reset Nigeria’s economic fundamentals and restore investor confidence.
Nigeria’s inflation rate eased to 22.22 percent in June 2025, down from 22.97 percent in May, marking a 0.75 percentage point drop month-on-month, According to data from the National Bureau of Statistics (NBS). Compared to June 2024, when inflation peaked at 34.19 percent, the figure reflects a notable 11.97 percentage point decline.
Analysts attribute this improvement to the CBN’s reforms, which include foreign exchange unification, tighter monetary policy, and efforts to rebuild external buffers.
These reforms have also contributed to a stable naira and improving FX liquidity, leading to a narrowing gap between official and parallel market rates. In tandem, the country’s external reserves rose to $37.93 billion by mid-July, up from $37.43 billion earlier in the month. The increase in reserves is also supported by stronger balance of payments performance and sustained foreign portfolio inflows.
Early this year, specifically in January 30, 2025, Olayemi Cardoso, governor of the CBN said, “Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship.”
As macroeconomic indicators continue to show signs of recovery, the CBN’s policy direction is earning praise for restoring stability and laying a foundation for long-term economic resilience. The foreign exchange (FX) reforms instituted by the Cardoso-led CBN, alongside Federal Government policies aimed at boosting local production, reducing FX demand pressure, and easing domestic prices, have been instrumental in achieving macroeconomic stability.
Expectations remain high that the apex bank will sustain the FX reforms, while fiscal authorities are encouraged to intensify efforts to enhance FX earnings, especially from oil, gas, and non-oil exports.
Analysts maintain that these efforts are central to the sustained easing of inflation. The latest figures from the NBS show that annual headline inflation dropped by 0.75 percentage points to 22.22 percent in June, down from 22.97 percent in May. The decline was largely attributed to base effects, FX market stability, and reduced volatility in energy prices.
Read also: Holding the line: Why the CBN is likely to retain MPR at 27.5%
Domestic Economy and Capital Inflows
In a report to investors, analysts at Cordros Securities wrote: “We expect inflation to remain on a downward trend, particularly as the naira is projected to stay stable. Additionally, stable global oil prices should help keep domestic fuel and transportation costs in check.”
They also noted a resurgence in capital inflows, following a moderation in global financial pressures since May. Elevated naira yields and a more stable FX market have continued to attract foreign portfolio investment (FPI) and restore investor confidence.
Specifically, total foreign inflows surged by 315 percent to $2.73 billion in June, marking the highest monthly inflow since March 2019 from $657.4 million in April. FPI accounted for 97.2 percent of total inflows. This rebound in capital inflows also reduced the need for CBN interventions in the FX market as demand-side pressures softened.
Meanwhile, despite continued CBN interventions and external debt service obligations, Nigeria’s external reserves stood at $37.93 billion as of July 18. The reserve level, aided by marginal oil receipts, is sufficient to cover nearly 10 months of imports and remains a critical buffer for the economy.
Looking ahead, analysts expect robust FX liquidity from both foreign and local sources, driven by strong market confidence, to continue supporting naira stability. They also project headline inflation to decline further in July, supported by a moderation in both food and core components.
“Food prices should ease with the early green harvests and stable naira helping to reduce pressure on imported food. Core inflation is also likely to remain stable, benefiting from reduced exchange rate pass-through effects and steady energy prices,” the analysts noted.
Activating Multiple FX Sources
Under Cardoso, the CBN has focused on diversifying FX sources to increase dollar inflows and improve access for manufacturers and retail users.
Efforts have included enhancing diaspora remittances through product innovation, licensing new International Money Transfer Operators (IMTOs), adopting a willing buyer-willing seller FX model, and ensuring timely naira liquidity access for IMTOs. These measures have simplified FX inflow channels and strengthened the value chain.
The result has been a notable build-up in gross FX reserves, helping support the naira. The CBN’s strategy acknowledges that strong FX inflows are crucial for achieving monetary and fiscal stability.
Diaspora remittances, estimated at $23 billion annually remain a reliable FX source. The CBN has outlined plans to double formal remittance receipts within a year, leveraging improved market confidence, a stable FX framework, and inclusive banking policies.
These reforms are already bearing fruit. According to Charlie Bird, director of Trading at Verto, the FX market has become more balanced, enabling foreign investors and airlines to repatriate funds with greater ease. Speaking at the Cordros Asset Management seminar, “The Naira Playbook”, Bird noted that Nigeria has become increasingly attractive to global investors due to FX stability driven by CBN reforms.
Oil Production Supports Disinflation
In an emailed report, Ike Chioke, Afrinvest West Africa’s managing director, highlighted key economic drivers including crude oil production trends, OPEC data, and inflation statistics from NBS.
According to him, Nigeria’s average daily crude oil production rose by 3.6 percent month-on-month in June 2025 to 1.5 million barrels per day (mbpd), as per data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and OPEC. When condensates are added, total output reached 1.7 mbpd, marking a 2.4 percent increase and the second-highest monthly average for 2025, after January’s 1.74 mbpd.
Notably, production rebounds at major terminals Forcados (up 9.5 percent), Odudu (up 9 percent), Qua Iboe (up 2.3 percent), and Bonny (up 1 percent), offset declines at Brass, Escravos, and Tulja-Okwuibome.
Afrinvest estimates Nigeria earned an average of $105 million daily in June from oil exports (based on an average price of $69.73 per barrel), up 13.6 percent from May. This ranks as the third-highest revenue month in 2025, after January and February.
“We maintain our projection from the H2:2025 outlook report that the rebasing of the Consumer Price Index (CPI) will continue to support headline inflation moderation through Q3 2025, even if this may diverge from consumers’ lived experience,” Chioke added.
Afrinvest projects inflation to ease to 21.6 percent in July, though monthly inflation may rise slightly to 1.75 percent, up from 1.68 percent in June.
Naira Rally to Reduce Import Costs
The recent appreciation of the naira is expected to significantly reduce import costs. Last week, the naira gained about 3.25 percent at the parallel market, strengthening from N1,580 to N1,530 per dollar. In the official window, it traded at N1,536, narrowing the rate gap between both markets to just N6 per dollar.
In Nigeria, importation costs such as import duties, VAT, and levies are calculated based on the Cost, Insurance, and Freight (CIF) value, which is highly sensitive to exchange rate fluctuations. As such, a stronger naira directly reduces the landed cost of goods.
According to the United Nations COMTRADE database, Nigeria’s total imports in 2024 were valued at $40.97 billion, with key trading partners including China, Belgium, and India.
New data from the NBS shows that Nigeria imported food and beverages worth N1.67 trillion ($1 billion) in Q1 2025, up 5 percent from N1.59 trillion in Q1 2024.
Analysts from Cordros Securities noted that the naira’s appreciation helped offset higher imported fuel prices caused by Middle East tensions. “We expect FX liquidity to remain robust, backed by reduced global pressures and rising market confidence. A stronger reserve position also enhances the CBN’s ability to intervene if needed,” they stated.
Despite moves toward fuel self-sufficiency, Nigeria still relies on imports. However, the reduced import bill in Q1 signals progress toward lowering dependence on imported fuel.
Meanwhile, global trade tensions have eased following the US President’s extension of tariff negotiations until August 1. The UK, China, and Vietnam have already reached agreements with the US, while other nations continue discussions on trade realignments.
Although uncertainty remains over the long-term implications of global tariff shifts, analysts say the recent de-escalation and improved FX conditions in Nigeria have helped calm market volatility.
