Naira vs. Pound Sterling: Holiday Rush Fuels FX Plunge to N1,950/£1
The Nigerian Naira (NGN) has seen a sharp depreciation against the British Pound Sterling (GBP), with the unofficial market rate hitting N1,950/£1. This mid-week plunge is primarily driven by a surge in demand for foreign exchange (FX) spurred by the upcoming holiday season, coupled with the ongoing strengthening of the Pound in global markets.
The Nigerian economy faces a twin challenge: seasonal liquidity pressure from increased demand for imports, travel, and school fees, and external pressure from the Pound’s resilience following favorable UK fiscal and monetary policy developments.
Table of Contents
Current Exchange Rate and Market Forecast
Factors Driving Naira Weakness
Seasonal FX Demand in Nigeria
Limited FX Inflows
Nigeria’s Export Sector: A Long-Term Anchor
Encouraging Non-Oil Growth
Key Export Performers
Factors Bolstering the British Pound Sterling
UK Budget and Fiscal Discipline
Diverging Monetary Policy
Current Exchange Rate and Market Forecast
The Naira’s mid-week trading session saw the British Pound settle at N1,931 at the official market, with the parallel (unofficial) market rate spiking to N1,950/£.
| Market | Mid-Week Rate (Approx.) |
| Official Market (CBN) | N1,931/£1 |
| Unofficial (Parallel) Market | N1,950/£1 |
Market Forecast: Analysts predict that if current pressures persist, the GBP/NGN rate may reach N1,950–N1,975/£ by the end of the month, with potential highs above N2,000/£ should FX inflows remain constrained or import surges continue.
Factors Driving Naira Weakness
The recent depreciation of the Naira is a result of both domestic demand-side shocks and structural issues related to FX supply.
Seasonal FX Demand in Nigeria
The primary short-term driver is the holiday rush. Nigerian residents and businesses require increased foreign currency for several seasonal needs:
Imports: Greater importation of goods for the festive season.
Travel: Increased demand for personal and business travel abroad.
Tuition Payments: Foreign currency needed for school fees for students studying overseas.
This intensified retail demand in the unofficial market quickly absorbs limited liquidity, driving the price (exchange rate) higher.
Limited FX Inflows
The core structural issue remains limited FX inflows. While Nigeria’s total exports, expressed in Naira, have risen substantially (from N36 trillion in 2023 to N77.4 trillion in 2024), dollar-denominated export earnings decreased slightly (from $60.65 billion to $57.9 billion). This signals that the devaluation of the Naira may be magnifying the Naira value of exports, masking a slight decline in the actual FX earned, which is the key determinant of Naira strength.
Nigeria’s Export Sector: A Long-Term Anchor
Despite the current FX market volatility, Nigeria’s long-term prospects are underpinned by encouraging growth in its export sector and a drive toward diversification.
Encouraging Non-Oil Growth
The Nigerian export industry demonstrated encouraging growth in 2024, highlighting the nation’s potential to increase trade. Data from the International Trade Centre (ITC) shows impressive gains in non-oil sectors, which could eventually improve Nigeria’s standing in international trade and boost dollar-denominated earnings over time.
Key Export Performers (2023 vs. 2024)
| Export Commodity | 2023 Value | 2024 Value | Increase |
| Cocoa Exports | $759 million | $2.6 billion | Dramatic Increase |
| Ores and Residues | N/A | $824.4 million | Notable Increase |
The dramatic rise in cocoa exports and the notable increase in ores and residues demonstrate the nation’s ability to diversify its export base beyond its traditional reliance on crude oil.
Factors Bolstering the British Pound Sterling
The weakness of the Naira is being exacerbated by the bullish momentum of the British Pound in the global FX market.
UK Budget and Fiscal Discipline
The Pound has shown resilience due to the UK government’s commitment to fiscal discipline. Chancellor Rachel Reeves’ November budget, which raised £26 billion in taxes, signaled controlled borrowing and a commitment to averting deeper deficits, which generally supports investor confidence in the currency.
Diverging Monetary Policy
The Pound has also gained ground, trading at approximately 1.333 against the U.S. Dollar (USD), due to diverging monetary policy expectations:
Weaker US Dollar: Markets are fully pricing in an imminent Federal Reserve (Fed) rate cut, with potential for further easing in the near term, which has led to the Greenback sliding against major currencies.
Resilient BoE Stance: Although markets are pricing in a potential 25-basis-point Bank of England (BoE) cut this month, the BoE’s overall path appears less aggressive than the Fed’s, creating a positive interest rate differential that supports the GBP.
This external strength, combined with local seasonal FX demand, puts significant upward pressure on the GBP/NGN exchange rate.
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