Nigeria’s foreign exchange market has once again come under intense pressure as a mix of falling global oil prices and new trade tensions between the US and China drags the naira down. Despite the Central Bank of Nigeria (CBN) injecting over $634 million into the market, foreign reserves dipped to $38.04 billion, and the naira weakened by 2.3% to N1,603.78/$1 on the official market. The parallel market didn’t fare any better, with rates sliding to N1,600. Meanwhile, the forwards market continues its downward trend, with long-term contracts reflecting deeper investor anxiety.
Global cues are playing a central role in the turbulence. The reemergence of US tariff hikes under President Trump has reignited fears of a global slowdown, particularly denting oil demand from industrial giants like China. On the other hand, OPEC’s earlier-than-expected production boost has added to supply glut concerns. This cocktail of low demand and high supply has sent oil prices south, and countries like Nigeria that rely heavily on crude oil for foreign earnings are now feeling the heat.
Investment bank J.P. Morgan, once bullish on Nigeria’s carry trade due to its high yield, has now raised red flags. In a recent research note, the bank warned of rising macroeconomic risks and advised investors to unwind positions in Nigerian treasury bills, especially as Brent crude threatens to drop below $60—a level well under Nigeria’s budgeted break-even point. The report cautioned that even if Nigeria avoids a full-blown recession, falling oil earnings could easily flip the current account into a deficit, worsening the naira’s outlook.
Although the CBN is doubling down on interventions to steady the currency, analysts argue that without structural reforms, these efforts won’t hold water for long. Experts from both Cordros Capital and Lagos Business School stressed that Nigeria’s overreliance on oil and lack of export diversification make it vulnerable to global economic shocks. The general consensus? Without urgent policy shifts to expand non-oil revenue sources and attract long-term foreign investments, the naira is likely to remain on shaky ground.
Source: the sun