The forex market in May 2025 is shaped by global events, domestic policies, and currency trends. Here’s what you need to know:
- Global Trends:
- The U.S. dollar has declined by 8.5% year-to-date, with its share of global reserves at 57.8%.
- The Federal Reserve held interest rates steady at 4.25%–4.50%, while the euro rose 10% over two months.
- Naira Updates:
- Official rate: ₦1,530/$; Parallel market: ₦1,580/$.
- Foreign reserves climbed to $38.10 billion (6 May 2025).
- Market stability is improving, with a narrowing gap between official and parallel rates.
- Key Market Drivers:
- Oil prices dropped to ₦49,500/barrel, below Nigeria’s ₦56,250 budget benchmark.
- Crude oil demand is slowing, while OPEC+ increases supply, affecting Nigeria’s forex earnings.
- Currency Pair Performance:
- USD/NGN: Stable at ₦1,599.01 (official) and ₦1,632 (parallel).
- EUR/NGN: Bearish trend; trading at ₦1,798.55 with a projected 10.27% decline next month.
- GBP/NGN: Narrow range; closed at ₦2,144.22, with minor fluctuations expected.
- Upcoming Events:
- EUR CPI (19 May), UK CPI (21 May), U.S. Manufacturing PMI (22 May), German GDP (23 May).
Quick Comparison Table
| Currency Pair | Current Rate (₦) | Expected Movement | Key Indicator |
|---|---|---|---|
| USD/NGN | 1,599.01 | Stable | Forex Reserves Growth |
| EUR/NGN | 1,798.55 | Bearish (-10.27%) | Euro Strength |
| GBP/NGN | 2,144.22 | Slight Decline | UK CPI Impact |
For Nigerian traders, combining technical tools (RSI, MACD) with disciplined risk management (1% per trade, 1:2 risk-reward ratio) is critical. Focus on regulated platforms and stay updated on global and domestic developments for better trading decisions.
Market Forces Driving Forex in May 2025
World Events Affecting NGN
Global trends are playing a major role in shaping the performance of the NGN this May. The U.S. Federal Reserve has kept interest rates steady at 4.25%–4.50%. However, with inflation and unemployment on the rise, the Fed has hinted at potential market volatility ahead.
The oil market is another critical factor. Global oil demand is projected to decline from 990,000 barrels per day in the first quarter of 2025 to 650,000 barrels per day in the months that follow. Meanwhile, OPEC+ plans to increase output by 411,000 barrels per day in June 2025, which is already pushing Brent crude prices below ₦49,500 (approximately $66) per barrel.
| Factor | Current Status | Impact on NGN |
|---|---|---|
| Oil Price | ₦49,500/barrel | Below the 2025 budget benchmark of ₦56,250 ($75) |
| Global Oil Supply | 104.6 mb/d average | OPEC+ adding 310 kb/d extra supply |
| Oil Demand Growth | Slowing to 650 kb/d | Pressure on Nigeria’s forex earnings |
These global forces set the backdrop, but domestic policies are equally critical in determining the NGN’s trajectory.
Nigerian Policy Effects on Forex
The Central Bank of Nigeria (CBN) has maintained a traditional monetary policy approach, which has helped stabilize the forex market. Nigeria’s foreign reserves remain strong, providing coverage for nearly 10 months of imports. This reserve strength plays a key role in defending the NGN.
"We can see that confidence is gradually returning to our markets, which shows that we are on the right course now. Obviously, as that happens, we are in a better position to begin the process of moderating rates because stability is very, very important."
– Olayemi Cardoso, CBN Governor
Additionally, the Nigeria Foreign Exchange Code and the extension of the Bureau De Change (BDC) FX window to 30 May 2025 have improved transparency and liquidity in the forex market. However, challenges remain. Nigeria’s crude oil production averaged 1.468 million barrels per day in Q1 2025, falling short of the 2 million barrels per day target.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the risks:
"The drop in crude oil price will have significant implications for the implementation of the 2025 national budget".
This underscores the importance of monitoring both international developments and domestic policies to maintain NGN stability.
Foreign Exchange: CBN Unveils Nigerian FX Code To Boost Market Transparency
Main Currency Pairs Review
This section highlights the performance of key currency pairs, reflecting the impact of global trends and local monetary policies.
USD/NGN Market Review
The USD/NGN pair maintained a tight trading range under stable official market conditions. On 18 May 2025, the official exchange rate closed at ₦1,599.01 per US dollar, with intraday movements between ₦1,597.00 and ₦1,603.50. Meanwhile, the parallel market rate stood at ₦1,632 per US dollar on the same date.
Here’s a breakdown of key levels for USD/NGN:
| Level Type | Price Point | Market Response |
|---|---|---|
| Resistance | ₦1,603.50 | Selling pressure |
| Current | ₦1,599.01 | Trading zone |
| Support | ₦1,597.00 | Buying interest |
Nigeria’s external reserves saw an increase of $364 million between 30 April and 14 May 2025, reaching $38.298 billion. This boost provided much-needed stability for the naira.
Next, let’s dive into the performance of the EUR/NGN pair, where bearish trends dominate.
EUR/NGN Trading Guide
As of 19 May 2025, the EUR/NGN pair was trading at ₦1,798.55. Technical indicators paint a bearish picture:
- 50-Day SMA: ₦1,862.14
- 200-Day SMA: ₦1,729.63
- 14-Day RSI: 43.10
An expected decline of 10.27% is projected over the next month. Volatility is at 3.90%, with the following price forecasts:
| Timeframe | Forecast Price | Change % |
|---|---|---|
| End of Week | ₦1,768.15 | -1.69% |
| Next 7 Days | ₦1,666.10 | -7.36% |
| Next Month | ₦1,613.77 | -10.27% |
GBP/NGN Market Guide
The GBP/NGN pair also exhibited a narrow trading range, closing at ₦2,144.22 per pound. Technical analysis indicates a trading band of ₦2,066–₦2,169, with an average price around ₦2,121. The market forecast for the end of May suggests a target of ₦2,122, representing a slight decline of -0.3%.
Traders should keep an eye on the upcoming MPC meeting on 19–20 May, as it may influence market sentiment.
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Trading Methods for May 2025
Technical Tools for NGN Trading
For traders in Nigeria, mastering technical analysis tools is key to navigating NGN trading. Indicators like Moving Averages (MA) and the Relative Strength Index (RSI) are particularly useful for identifying market trends and spotting potential reversals.
When analysing USD/NGN, keep an eye on these indicators:
| Indicator | Setting | Usage |
|---|---|---|
| RSI | 14-period | Below 30 indicates oversold; above 70 signals overbought |
| MACD | 12,26,9 | Monitor for crossovers on the signal line |
| Fibonacci | Daily chart | Highlights key retracement levels |
To refine your strategy, use a 4-hour chart to observe broader trends and a 1-hour chart for precise entry points. While these tools can help simplify market analysis, they should always be paired with disciplined risk management.
Risk Control Methods
Effective risk management is critical, especially in volatile markets. Here’s a practical framework for determining position sizes:
| Account Size | Max Risk per Trade | Stop-Loss (50 pips) | Position Size |
|---|---|---|---|
| ₦1,000,000 | 1% (₦10,000) | 50 pips | 0.2 lots |
| ₦5,000,000 | 1% (₦50,000) | 50 pips | 1.0 lots |
| ₦10,000,000 | 1% (₦100,000) | 50 pips | 2.0 lots |
To manage risk effectively:
- Always set a stop-loss order 50 pips away from your entry point, especially for major pairs like EUR/NGN and GBP/NGN.
- Maintain a 1:2 risk-reward ratio, ensuring potential gains outweigh potential losses.
Additionally, the Central Bank of Nigeria (CBN) has been maintaining forex liquidity by selling $25,000 weekly to Bureau de Change operators until May 30, 2025. This policy contributes to a more stable trading environment.
Market forecasts suggest a 24.62% projected increase in EUR/NGN over the next year. This could present opportunities for traders willing to take longer-term positions, provided they stick to strict risk management principles.
Trading Tools for Nigerian Traders
Market Analysis Tools
For Nigerian traders, having tools tailored to local needs is essential. May 2025 offers a range of market analysis tools designed to align with West African Time (WAT) and NGN currency tracking. These tools help traders make better decisions while adhering to local regulations.
Here’s a breakdown of some key tools:
| Tool Type | Primary Features | Benefits for Nigerian Traders |
|---|---|---|
| Economic Calendar | Real-time event tracking | Provides timely updates in sync with WAT |
| Currency Converter | Live NGN exchange rates | Ensures precise local currency calculations |
| Margin Calculator | Risk assessment tools | Specifically designed for NGN currency pairs |
| Technical Analysis | Advanced charting capabilities | Enables analysis of major NGN currency pair trends |
For traders who opt for higher account tiers, premium features provide deeper insights and advanced trading options. All tools are seamlessly integrated into mobile platforms, allowing users to monitor the market and execute trades in real time.
Mobile Trading Apps
Mobile trading apps are indispensable for Nigerian traders, offering real-time updates and functionality that complement desktop tools. May 2025’s mobile apps are loaded with features to ensure traders stay connected and informed, no matter where they are.
Here are some essential features:
- Security and Risk Management
- Two-factor authentication for added security
- Strong password protection
- Instant stop-loss execution to manage risks
- Integrated margin calculators for quick assessments
- Real-time risk evaluation tools
- Market Analysis Tools
- Built-in technical analysis for informed decisions
- Integration of real-time market news
- Customizable alerts for price movements or events
- Advanced charting options
- NGN-based calculations for local relevance
- Trading Features
- Quick order execution for fast-moving markets
- Support for multiple order types
- Access to Level II pricing for greater market depth
- Portfolio tracking to monitor performance
- Real-time position updates for better trade management
While mobile apps are powerful, they should work alongside desktop platforms for making major trading decisions. With statistics showing that 84% of retail investor accounts lose money when trading CFDs, combining these tools into a well-thought-out strategy is crucial for success.
Conclusion: May 2025 Summary
May 2025 Market Summary
The forex market in May 2025 presents a mix of challenges and opportunities for Nigerian traders. Global uncertainty, driven in part by Moody’s downgrade of the US sovereign rating, has continued to shape forex sentiment and trading conditions. However, Nigeria’s foreign exchange reserves, standing at $38.10 billion as of May 2025, offer a solid base for market operations.
Here’s a quick look at key market indicators:
| Market Indicator | Status | Trading Impact |
|---|---|---|
| Global Volatility | Elevated | More trading opportunities |
| Forex Reserves | $38.10 billion | Greater market stability |
| Policy Environment | Supportive | Lower market uncertainty |
"We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms." – Central Bank Governor Olayemi Cardoso
These factors highlight the need for traders to take calculated and well-informed positions in the current market.
Next Steps for Traders
Given the current market dynamics, Nigerian traders should consider the following strategies:
- Stick to Regulations: Always trade through SEC-approved platforms and stay compliant with ISA 2025 requirements.
- Leverage Advanced Tools: Use AI-powered analysis tools and automated risk management systems to enhance decision-making.
- Adjust Trading Strategies: Focus on approaches like trend following and breakout trading, while balancing technical and fundamental analysis.
The Central Bank of Nigeria’s ongoing commitment to market-driven reforms is expected to maintain stability throughout Q2 2025. With global volatility creating opportunities and domestic policies offering support, disciplined trading, paired with robust risk management, remains essential for navigating these conditions effectively.
FAQs
How could declining global oil demand and increased OPEC+ supply affect Nigeria’s forex market and the naira?
Nigeria’s forex market and the stability of the naira are deeply influenced by oil revenue since crude oil serves as a key source of foreign exchange for the country. If global demand for oil drops while OPEC+ increases supply, oil prices could fall. This would shrink Nigeria’s foreign exchange earnings, likely putting pressure on the naira and making it more vulnerable to depreciation.
An oversupply from OPEC+ could push oil prices even lower, leading to fiscal strain for Nigeria and heightening the risk of inflation. For traders in Nigeria, staying alert to these shifts is crucial. Developing strategies that consider potential market turbulence during this time is essential for managing risks effectively.
What trading strategies can Nigerian traders use to respond to the expected 10.27% drop in the EUR/NGN exchange rate this May?
To tackle the expected 10.27% drop in the EUR/NGN exchange rate this May, Nigerian traders might consider hedging and short-selling as possible strategies.
Hedging is about safeguarding your investments by offsetting potential losses in one currency with gains in another. For instance, traders could invest in currencies expected to strengthen against the Naira. This way, any losses from the EUR/NGN decline could be balanced by gains elsewhere.
Short-selling, on the other hand, offers an opportunity to benefit from the predicted dip. Here’s how it works: traders borrow Euros at the current rate, sell them, and later buy them back when the rate drops. The difference becomes their profit.
Keep an eye on major economic updates and geopolitical events that could influence currency trends. Adjust your approach as needed, and always trade with a clear plan that aligns with your risk tolerance.
How do Nigeria’s foreign reserves impact the naira’s stability, and what role does the Central Bank of Nigeria play in this process?
Nigeria’s foreign reserves play a crucial role in keeping the naira stable. They serve as a financial buffer against external economic shocks and help build trust in the currency. As of April 2025, these reserves were at ₦23.11 billion – a recovery that has enabled the Central Bank of Nigeria (CBN) to better support the forex market.
The CBN is central to managing these reserves and enforcing monetary policies aimed at stabilising exchange rates. By intervening in the forex market, the bank boosts liquidity and reduces naira volatility, ensuring it holds steady against major global currencies. Actions like maintaining the Monetary Policy Rate and encouraging transparency among market players contribute to creating a more stable and reliable forex environment for the country.