By Chinwendu Obienyi

This marks a potential 9.5 per cent depreciation from current levels, underscoring persistent challenges facing the currency amid a fragile global economic outlook.

Nigeria’s open capital account leaves the naira vulnerable to global financial shocks, however, the report noted that recent measures introduced by the Central Bank of Nigeria (CBN) have prevented even steeper depreciation. These include policy reforms designed to enhance FX market transparency and structure, as well as an improved external reserves position.

“In our assessment, the naira could have depreciated beyond N1,700.00/$1 in the absence of these reforms and the CBN’s intervention capacity. The official parallel gap also remained slim (YTD average: 2.6 per cent), helped by strong inflows to the retail market with CBN now allowing BDCs to purchase FX from authorized dealers in the Nigerian Foreign Exchange Market (NFEM)”, the report said.

The country’s external buffers have also improved markedly, with the CBN disclosing that net FX reserves rose to $23.11 billion by the end of 2024, up from just $3.99 billion the previous year. This has given monetary authorities some headroom to mitigate excessive FX volatility, at least in the short term.

Still, global pressures are likely to weigh on the naira in the coming months. Elevated interest rates in advanced economies, geopolitical tensions, and fluctuating oil prices all pose downside risks to Nigeria’s exchange rate outlook.

While the country’s current account surplus is expected to narrow, analysts at Cordros Securities believe it will remain positive offering modest support to the naira by reducing pressure on reserves and sustaining foreign inflows. Furthermore, high domestic interest rates and a gradually moderating inflation rate have helped ease speculative demand for the US dollar.

“We believe confidence in the naira has relatively improved, dampening speculative demand and contributing to exchange rate stability. Based on our model, we estimate the naira may reach N1,700/$1 by year end, indicating a YTD depreciation rate of 9.5 per cent (2024: 45.0 per cent YTD). This projection reflects prevailing macroeconomic fundamentals, FX market dynamics, and the impact of recent policy reforms.

We note that an improvement in the external environment, particularly through stronger capital flows, easing financial conditions, or improved terms of trade, could strengthen the naira beyond our baseline estimate. Conversely, in a downside scenario where global trade tensions intensify further and crude oil prices retreat toward $50 per barrel, the naira could face increased depreciation pressures, and potentially weaken to around N1,850/$1”. a critical cushion for Nigeria’s economy. In 2023 alone, remittances topped $21 billion, according to World Bank data, making Nigeria the largest recipient in Sub-Saharan Africa. These inflows often exceed foreign direct investment and official development assistance combined, and serve as a vital source of income for millions of households, especially in rural areas.

Recognising this potential, the CBN under Governor Olayemi Cardoso has prioritised boosting diaspora remittance inflows through a raft of financial and regulatory reforms. This year, the apex bank in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS) introduced the Non-Resident Bank Verification Number (NRBVN) framework to enable Nigerians abroad to remotely open BVN-linked naira and domiciliary accounts.

The move, designed to capture more inflows through official channels, was widely praised by stakeholders and fintech operators alike. Governor, CBN, Olayemi Cardoso, whilst fielding questions from newsmen at the last Monetary Policy Meeting (MPC), said the platform will be a game-changer in expanding access to financial services for Nigerians in the diaspora.

Cardoso noted that the cost of repatriating funds from overseas to Nigeria and many other emerging markets which stands around 7 per cent is clearly unacceptable.

“One key solution, which we have now begun to pursue, is rooted in the volume business. As we drive up transaction volumes, the cost of remittances will inevitably decline and I must say, the recent bold steps taken in partnership with the Nigerian Regulatory Bank Verification Network (NRBVN) is truly game-changing. This is what our diaspora community has been waiting for, that is, the ability to transact from abroad seamlessly. Now, the opportunity to invest in the country of their birth is wide open. It could not have come at a better time”.

According to him, the apex bank sees itself as facilitators and catalysts clearing the path and letting the private sector take the lead. He noted that the key target of $1 billion a month in diaspora inflows might sound ambitious, but it is not unattainable.

The CBN’s strategy appeared to gain traction. By early 2025, remittances through formal channels had climbed to over $600 million monthly, with a target of hitting $1 billion by the third quarter (Q3) of the year.

“In fact, we have already made remarkable progress moving from just over $200 million to peaking at over $600 million in a single month. That is the Nigerian spirit in action and at work. There is nothing that would stop us from exceeding that. This shows what is possible when we get creative, stay committed, and work together. Other countries like Pakistan, India, and others have done this, so why can’t we? So, this is a reflection and effort that proves what can be achieved when the government steps back and allows the private sector to lead”, the CBN governor remarked.

However, that momentum is now at risk as the U.S President, Donald Trump, at the weekend signed the proposed “One Big Beautiful Bill”. The bill includes a provision to levy a 3.5 per cent surcharge on all outbound remittances by foreign nationals. The funds raised would reportedly go toward enhancing border security and immigration enforcement.

For Nigerian families that rely on modest monthly transfers from relatives abroad often between $100 and $500, a new fee structure could sharply reduce the value of those transfers or deter formal transactions altogether. Already, fintech operators say they are fielding concerns from customers about the potential costs and implications of the policy.

Analysts at CardinalStone Partners in a recent brief seen by Daily Sun, warned that such a tax could push many Nigerians abroad to revert to informal and unregulated remittance channels, undermining efforts by the CBN to formalise inflows and improve transparency in the foreign exchange market.

Similarly, the U.S Department of State noted that effective July 8, 2025, most non-immigrant and non-diplomatic visas issued to Nigerians will now be valid for only three months and limited to a single entry.

Across Europe and Asia, governments are implementing tighter immigration controls, increased financial scrutiny, and stricter documentation requirements for money transfers. Specifically, in the UK, another major remittance source country for Nigeria, new rules around immigration process for Nigerians applying for study and work visas, proof of income and recipient verification have increased processing times and compliance burdens for remittance service providers.

The United Arab Emirates (UAE) has also imposed tougher entry conditions for Nigerian travelers, banning transit visa applications entirely. According to the UAE, Nigerians aged 18-45 will no longer be eligible for tourist visas unless accompanied while those aged 45 and above must provide a 6-month personal bank statement showing at least $10,000 monthly balance before they are granted visas.

These policy shifts are driven by a combination of factors: anti-money laundering efforts, populist politics, national security concerns, and a push to tax cross-border capital flows. But for developing economies like Nigeria, they represent a new layer of risk in already fragile FX ecosystems.

Economic implications

If diaspora remittances fall significantly, the consequences for Nigeria could be severe. First, it would tighten pressure on the naira, which has already experienced persistent volatility despite CBN interventions and rising oil prices.

The naira depreciated by 0.2 per cent to N1,531/$1 at the official market amid emerging demand pressures which outweighed supply from foreign portfolio investors (FPIs) looking to participate in the Open Market Operations (OMO) Primary Market Auction (PMA) despite $50 million intervention from the CBN.

Secondly, household consumption could suffer as remittances are often used to pay for food, school fees, medical bills, and housing. A drop in these flows could worsen poverty, reduce domestic demand, and strain public social services. Finally, Nigeria’s fiscal position could weaken further with the government already grappling with a high debt burden and limited revenue.

Hence, reduced FX inflows could hinder its ability to service external debts or finance imports, especially for critical sectors like power and healthcare.

Experts’ views

This has led to several calls for Nigeria to engage in high-level diplomacy to advocate for policies that will not disproportionately hurt its diaspora.

They also called for a diversified strategy that goes beyond remittances. One such option is the issuance of diaspora bonds, which would allow Nigerians abroad to invest in infrastructure and development projects back home in exchange for returns in dollars or naira.

Governor Cardoso has hinted at such a possibility, noting in a recent interview that the CBN and Ministry of Finance are exploring instruments to channel diaspora savings into productive uses.

Founder, Cowry Asset Management Limited, Johnson Chukwu, speaking during a recent forum, noted that this could only work if there is a high level of transparency, security and impact.

“There is no doubt that there is appetite within the diaspora community for investment products but this can only work if there is a high-level of transparency, security, and impact”. Do we need to move beyond consumption driven inflows? The answer is yes. We need to move beyond consumption-driven remittances to investment-driven diaspora engagement”, Chukwu said.

Executive Director at Zenith Bank, Dr Temitope Fasoranti, said, “In the current environment, every dollar counts. Losing even $200–300 million a month in diaspora remittances would be a significant shock to Nigeria’s external balance. There have been calls to diversify our export base which is good but the government needs to also look at creating diaspora funds that will target housing, agriculture, or even renewable energy which can channel long term capital back home”

The CBN’s $1 billion monthly remittance target is not just a financial benchmark, it is a critical lifeline for the Nigerian economy at a time of macroeconomic fragility. But as global migration policies harden and remittance corridors become more expensive and complex, Nigeria faces a new set of external risks that require both nimble diplomacy and domestic resilience.

Whether the country can sustain and grow its diaspora inflows will depend on how effectively it can navigate these emerging global headwinds. For now, the road to $1 billion a month looks steeper than ever.