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The Nigerian Naira has seen many ups and downs in the last couple of years; its value has kept fluctuating against the US Dollar. Looking into 2025, a number of economic forecasts and analyses of experts point toward a very novel future of this vital currency pairing.
Current Exchange Rate Trends
At the official market, the naira exchanges for approximately N1,690/USD, while at the parallel market, it exchanges for approximately N1,740/USD, as of November 2024. This decline has resulted from various factors that include lower inflows of foreign exchange, instability in the economy, and inflationary pressures.
Expert Predictions for 2025
Several financial institutions and economic research firms have published their forecasts of what the Naira would be doing in 2025. According to Veriv Africa, a data insights and advisory company, the Naira is expected to trade between N1,790 and N2,000 per USD in 2025.
In a worst-case scenario, it projects the Naira to reach N2,000 per USD, and in a best-case scenario, it projects that at around N1,790 per USD.
Factors Influencing the Value of the Naira
Some key drivers that are likely to impact the value of the Naira in 2025 include the following:
- Oil Prices: The Nigerian economy is heavily dependent on oil exports. Movements in oil prices at the global level can significantly affect the value of the Naira. Analysts said it could drop to a low of **$40 per barrel** in 2025, as the United States increases production and OPEC+ stops cutting.
- Inflation: The aggregate inflation rate for 2025 is estimated at about 31%, further depleting the purchasing power of the Naira.
- Foreign Exchange Reserves: How far Nigeria is able to maintain and build reserves in foreign exchange will be critical for the stability of the Naira. Analysts believe supplementary streams from forex earnings will be required to shore up reserves.
- Government Policies: The fiscal and monetary policies of the government of Nigeria will also have their own impact on the value of the Naira. The proposed budget of N47.9 trillion for 2025 is the lowest in dollar terms since 2018 because of naira devaluation.
Conclusion
The future of the Naira against the Dollar in 2025 remains uncertain, with various factors influencing its trajectory. While some predictions are optimistic, others warn of potential challenges.
It will be crucial for policymakers to implement sound economic strategies to navigate these uncertainties and stabilize the Naira.
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