Sending money from the UK to Nigeria can make you gain or lose thousands of naira depending on the exchange rate on the day and time you’re sending money. For many in the UK supporting loved ones back home, paying school fees, investing or taking on a project, getting Pounds to Naira exchange rate is a financial lifeline. Understanding what drives these rates is very essential.
We all know exchange rates can be volatile, affected by a blend of domestic and global economic events. This article breaks down the 8 key factors influencing the Pounds to Naira rates, giving you a detailed understanding of the forces at play.
1. Nigeria’s Inflation Rate: The value of the naira is heavily influenced by domestic inflation. When inflation in Nigeria is high, the purchasing power of the naira decreases, and more naira is needed to buy the same amount of goods. This often leads to a weaker naira compared to stronger currencies like the pound. Earlier in 2025, Nigeria entered a double-digit inflation, partly due to subsidy removals and increased import costs, making the value of the Naira fall.
According to the National Bureau of Statistics, inflation remains persistently above 20%, pushing everyday Nigerians and businesses to rely more on foreign currencies to hedge against further naira depreciation.
2. Central Bank of Nigeria (CBN) Monetary Policy: The CBN’s approach to interest rates, foreign reserves management, and intervention in the FX market plays a pivotal role. A tight monetary policy and active intervention to defend the naira can support the exchange rate. However, as seen in past years, inconsistent policies or lack of transparency can erode confidence, pushing the naira down.
The CBN’s introduction of the new FX window in late 2024 aimed to create more flexibility, however, traders say the central bank’s interventions are still insufficient to meet demand, especially for remittances and business imports.
3. Oil Prices and Nigeria’s Export Revenue: Nigeria’s economy is still heavily oil-dependent. A surge in global oil prices typically boosts Nigeria’s dollar reserves, strengthening the naira. Conversely, falling oil prices reduce dollar inflows, weaken the reserves, and pressure the naira. As of Q1 2025, Brent crude prices have remained volatile, meaning continued fluctuations in the exchange rate.
Rystad Energy analysts have warned that Nigeria’s oil output, though slightly improved, is still below OPEC quotas, limiting the upside potential of higher oil prices.
4. UK Economic Stability and Bank of England Policies: Just as the naira responds to local economic conditions, the pound reacts to UK monetary policy, inflation, and economic growth. If the Bank of England raises interest rates to tackle inflation, it could strengthen the pound. A stronger pound naturally improves the GBP/NGN exchange rate, giving you more naira per pound.
With the UK entering a mild recession in late 2024 and expected slow growth in 2025, currency analysts expect mixed movements in the pound depending on interest rate guidance and inflation data.
5. Parallel Market vs. Official Rates: In Nigeria, the unofficial “black market” often offers significantly different rates from official channels. Many people prefer using black market rates for higher returns, but this comes with risk and instability. In 2025, the CBN is attempting to unify rates, but wide gaps still exist – especially during periods of FX scarcity.
This rate disparity can confuse consumers. A remittance service offering “no fee” may still provide a poor exchange rate, wiping out the supposed savings.
6. Remittance Policies and Cross-Border Transfer Regulations: Changes in remittance rules, such as caps on international transfers, documentation requirements, or restrictions on cash pickups, influence how much of your money reaches Nigeria. Also, partnerships between UK-based remittance platforms and Nigerian banks impact speed, fees, and rate competitiveness.
For example, fintech players like Lemfi & Moneywise offer competitive exchange rates and transparent fees, but users must comply with KYC and bank regulations, which occasionally delay payments.
7. Political Stability and Economic Reforms: Finally, confidence in the Nigerian economy – shaped by political events, elections, or fiscal reform efforts – heavily impacts investor and diaspora sentiment. Insecurity, policy reversals, or perceived instability can cause capital flight, lower investment inflows, and weaken the naira.
Investors are closely watching how the Tinubu administration follows through on 2024’s reform promises, including tax unification, FX market liberalization, and infrastructure development. Political backtracking could spook markets and send the naira into further decline.
8. The Role of Speculation and Sentiment: Sometimes, it’s not hard data but market sentiment that drives short-term movements. Speculators betting on naira depreciation or traders hoarding foreign currency in anticipation of a crisis can cause sudden drops in value. This is especially important around election seasons, court rulings, or major government announcements.
Social media also plays a growing role. Unverified rumors about CBN policy shifts or forex bans can quickly lead to panic and rate swings, especially in the parallel market.
Navigating the Pound to Naira exchange rate in 2025 demands more. From inflation and oil prices to central bank strategies and remittance regulations, each factor plays a part in the rate you get. The key to protecting your funds lies in education and strategy.
Use reputable comparisons like abokiuk.com to check daily rates from top providers, avoid vague "no-fee" claims, and keep an eye on both UK and Nigerian policy shifts. For the UK-based Nigerian community, staying proactive can mean the difference between a fair rate and losing value on every transfer.
Understanding what drives the exchange rate empowers you to make smarter, more impactful financial decisions. Keep watching the markets – because, in 2025 every pound counts more than ever