Nigeria's foreign-exchange regime has long been a mirror held up to the state itself: multiple rates, privileged access, and a policy conversation conducted half in public and half in the shadows. When President Bola Tinubu announced the unification of exchange-rate windows on June 14, 2023, the naira lost 36% of its value in a single day—plunging from ₦460 to ₦750 per dollar. It was the most dramatic currency adjustment in Nigerian history. Two and a half years later, the question is no longer whether the reform was painful. It was. The question is whether it has worked.

The Numbers Tell a Story of Stabilisation

By the metrics that matter to central bankers and investors, the managed float is delivering. Foreign reserves have climbed to $46.7 billion as of November 14, 2025—the highest level in seven years—providing 10.3 months of import cover. CBN Governor Olayemi Cardoso announced the milestone at the Monetary Policy Department's 20th anniversary colloquium, describing it as "a major milestone in the Bank's reform programme."

Inflation has fallen for seven consecutive months, from a peak of 34.6% in November 2024 to 16.05% in October 2025—the lowest since March 2022. Food inflation eased to 13.12%. The National Bureau of Statistics reported that core inflation has also begun to soften, "suggesting that the cumulative impact of tight policy settings is transmitting through the economy."

The international community has noticed. All three major credit rating agencies have upgraded Nigeria's outlook, with S&P Global moving from stable to positive. Nigeria has been removed from the FATF grey list, restoring access to correspondent banking relationships. And in November 2025, Nigeria raised $2.35 billion in Eurobonds with an orderbook of $13 billion—the largest in the country's history.

From Administrative Control to Market Discovery

For years, Nigeria ran overlapping exchange-rate systems: an official rate for government and priority imports, various windows for investors and exporters, and then the real anchor of price discovery—the parallel market. The system created enormous rents for those with access to cheap official dollars, while ordinary businesses and citizens paid steep premiums—sometimes 50% or more above the official price. The gap was not a bug; it was a feature that distributed wealth to insiders.

The CBN's June 14, 2023 press release on "Operational Changes to the Foreign Exchange Market" abolished this segmentation, collapsing all windows into the Investors and Exporters (I&E) window and reintroducing the "willing buyer, willing seller" model. Deputy Governor Kingsley told Bloomberg that day: "We are allowing the market itself to set a price." He added that the Bank's objective was a "managed float rather than a perfectly free float."

The Inflation Shock Arrived First

FX reform front-loads pain. As the naira depreciated sharply under the new regime, import prices adjusted almost immediately. Combined with the removal of fuel subsidies (saving an estimated ₦4 trillion annually), the cost-of-living squeeze was severe. Inflation peaked at 34.6% in November 2024, with food inflation exceeding 40%. The Nigerian Naira lost over 25% on June 14, 2023 alone, falling to NGN 632 per USD from NGN 463 per USD a day prior.

This is the fundamental political economy problem of exchange-rate adjustment: citizens experience the costs immediately and viscerally, while the benefits—greater investment, improved export competitiveness, a more honest price signal—arrive later and diffusely. As Focus Economics noted, "higher import prices and general cost-of-living increases were an inevitable side-effect of the sharp depreciation."

Parallel Market: Finally Converging

One early test of the managed float was whether the premium between official and parallel rates could stay narrow. A small gap signals that the market believes the official price; a widening one signals a return to arbitrage and scarcity. For much of 2024, the premium persisted, suggesting incomplete reform.

By late 2025, the convergence is unmistakable. As of November 21, 2025, the official NFEM rate stands at ₦1,450 per dollar, while the parallel market trades at ₦1,460-₦1,474—a premium of approximately 1.6%. CBN Governor Cardoso stated that the spread between official and Bureau de Change rates is now "below 2 percent." This convergence, more than any single statistic, suggests the market believes the official rate is real.

Investors Want Rules, Not Slogans

Foreign portfolio investors, burned by previous episodes of capital controls and delayed repatriations, remain cautiously optimistic. They are less interested in speeches than in mechanics: how often auctions are held, how quickly FX orders are settled, whether banks can reliably access dollars when their clients need them. The $13 billion orderbook for November's Eurobond suggests appetite is returning.

The key question for institutional investors is not the level of the naira but the predictability of access. A currency that depreciates gradually but can be freely converted is far more attractive than one that is nominally stable but trapped. As Goldman Sachs economist Andrew Matheny told Reuters: "Just the fact that you have seen quite a bit of movement in a relatively short space of time has gotten a lot of people in the market excited."

What Could Go Wrong?

The reform remains fragile. Oil prices—Nigeria's primary source of FX—are volatile and subject to global uncertainty. The IMF's May 2025 Article IV consultation noted that "a further decline in oil prices or increase in financing costs would adversely affect growth, fiscal and external positions, undermine financial stability and exacerbate exchange rate pressures."

Foreign direct investment, despite improved sentiment, fell 25% month-on-month in October 2025 to $222 million, reflecting persistent concerns about security and policy uncertainty. Insecurity remains a challenge. And the 2027 elections create political pressure to loosen policy prematurely.

Where This Goes: Scenario Analysis

Nigeria's FX trajectory depends on variables largely outside Tinubu's control: global oil prices, US interest rates, investor sentiment toward frontier markets. Four scenarios capture the plausible range of outcomes:

The modal outcome—Scenario B, muddle-through—reflects Nigeria's demonstrated capacity for incremental adjustment and the reality that creditors have limited interest in forcing a crisis that would crystallize losses. The combined probability of adverse outcomes (Scenarios C and D totaling 25%) is manageable but not negligible. The 2027 election cycle represents the critical test: whether reform momentum survives political pressure.

What Success Would Look Like

Success will not mean a magically strong naira. It will mean a smaller gap between official and parallel rates maintained over time, lower FX arrears, predictable access for importers, and inflation that continues falling. It will also mean clearer communication: rules published, interventions explained, and data released on time.

Nigeria does not need a flawless FX model. It needs one that is predictable enough for people to plan their lives and businesses around. The bar is not perfection; it is credibility. And credibility, once squandered across decades of policy reversals and opaque decision-making, takes years to rebuild. The past 30 months suggest Nigeria may finally be building it.