The Naira to Pound (NGN/GBP) exchange rate is a crucial economic indicator for Nigeria, affecting trade, investment, and the cost of living. In 2025, several powerful factors are shaping its direction. Here are four key influences to watch:
1. Oil Prices and Export Earnings
Nigeria's economy is heavily reliant on oil exports. Fluctuations in global oil prices directly impact the country's foreign exchange reserves and, consequently, the strength of the Naira. In 2025, improved export earnings from crude oil and gas have supported the Naira, helping it appreciate modestly in the official market. However, any decline in oil prices or disruptions in production can quickly weaken the Naira against major currencies like the Pound.
2. Foreign Exchange Market Reforms and Policy Transparency
Recent reforms by the Central Bank of Nigeria (CBN), such as the introduction of the Nigeria Foreign Exchange Market Electronic Trading System (NFEM EFEMS), have improved price discovery, transparency, and liquidity in the FX market. These changes have boosted market confidence and led to short-term appreciation of the Naira. Continued implementation of such reforms is expected to stabilize or even strengthen the Naira in 2025, making it less susceptible to speculative attacks and volatility.
3. Capital Flows and Interest Rate Differentials
Foreign Portfolio Investment (FPI) plays a significant role in determining the value of the Naira. Higher yields on Nigerian treasury bills and bonds attract foreign investors, increasing demand for the Naira and supporting its value. Conversely, if yields fall or global investors perceive higher risks, capital outflows can weaken the currency. The CBN’s balancing act between offering attractive rates and managing debt servicing costs will be critical in determining the Naira's trajectory against the Pound.
4. Inflation and Domestic Economic Stability
Inflationary pressures and the general health of the Nigerian economy are major determinants of the Naira’s strength. In 2025, food prices began to decline, easing inflation and supporting the Naira. However, risks remain from potential exchange rate depreciation, rising input costs, and domestic insecurity. If inflation is kept in check and economic reforms continue, the Naira is more likely to hold its ground against the Pound.
The Naira to Pound exchange rate in 2025 is shaped by a mix of global and domestic factors, oil prices, FX market reforms, capital flows, and inflation trends. While recent reforms and improved export earnings offer reasons for cautious optimism, ongoing vigilance is needed as global economic shifts and domestic challenges continue to influence the market.