Nigeria’s Competitiveness Hits 25-Yr High On Weak Naira
The naira fall has driven Nigeria’s competitiveness to a 25-year high, with the nation’s trade surplus rising to its highest in more than a decade.
The naira, which has been devalued by more than 70 percent, fell from 460 to the dollar around 2023 to just below 1,500/$ now — one of the largest currency adjustments anywhere in the world for years. Only the Ethiopian birr has seen a bigger move recently.
“With the naira’s fall, Nigeria is arguably now more competitive than at any time in the past 25 years,” according to a report by British think tank Chatham House.
“The path to a more capital-rich, more diverse Nigerian economy can only be built on a competitive naira,” Chatham House said in its report entitled, ‘Nigeria’s economy needs the naira to stay.’
Weak naira lifts trade surplus
Similarly, Nigeria’s trade surplus surged to its highest level in at least a decade, powered by naira devaluation that made exports more competitive. Analysts see the streak extending in 2025.
Africa’s biggest oil producer recorded a net trade surplus of N16.9 trillion in 2024 — the highest on record. This is more than double the nation’s trade surplus in the previous year, according to BusinessDay’s analysis.
A trade surplus, also known as a positive balance of trade, occurs when a country’s exports exceed its imports. Trade deficit, on the other hand, is the opposite.
However, any less volatility of the naira could potentially reduce gains from currency devaluation on trade surplus.
“We anticipate a sustained rise in the trade surplus due to the expected expansion in Nigeria’s export trade volumes driven by the ramp-up in crude oil production on the back of increased refining capacity,” analysts at FBNQuest Merchant Bank said.
“A pick-up in import volumes driven by improved FX liquidity and enhanced accessibility to foreign currency will likely compress the nation’s trade surplus balance.”
Weaker naira better than cheaper dollar
While the naira has depreciated compared to what it was two years ago, it has improved Nigeria’s balance of payments, maintaining steady progress for nine straight quarters.
It has brought in foreign capital, which has seen the country’s reserves balloon to more than $40 billion.
The naira devaluation and the removal of fuel subsidies have offered some breather for the Nigerian budget, with the nation’s fiscal deficit narrowed from 6.4 percent of GDP in early 2023 to 4.4 percent in early 2024.
But a cheaper dollar makes imports rise while widening trade deficits and hampering economic growth.
“Excessively cheap dollars encourage companies and individuals to find ways of getting money out of the country, to park wealth in safer havens at low cost,” the report stated.
While the naira devaluation and removal of subsidies have seen the economy turn the corner, the reforms birthed by President Bola Tinubu have had far-reaching consequences on ordinary Nigerians, whose spending power has been hammered by poverty that has blighted the lives of at least 129 million people.
“President Tinubu’s economic reforms give Nigeria the best hope for sustainable growth that it has had for decades. The path the reform process takes next will be crucial for the country’s future,” Chatham House noted.
Nigeria ‘desperately’ needs FDI to remain productive economy
Nigeria’s economic recovery lies in attracting capital in the form of foreign direct investment (FDI) to improve productivity, job creation and growth.
“It is something of a tragedy that this country of 230 million people has failed to attract more than $2 billion worth of net FDI inflows annually in recent years.”
Stronger naira will wipe out gains of reforms
There has been a push for the country to allow the naira to strengthen against the dollar to abate inflationary pressures that ended 2024 at 34 percent and crashed to 24 percent in January 2025 as a result of the inflation data overhaul.
But this will erase the hard-won currency stability and bring the country back to its status quo as gains of reforms diminish.
“A currency that stays competitive is a necessary – although by no means sufficient – condition to encourage more productive capital to enter the country.
“Also essential is a stable commitment to improve the business climate – everything from improving electricity supply to tackling corruption, reducing red tape and enhancing the sanctity of contracts,” the report indicated.
