The Nigerian naira saw slight gains in the country’s foreign exchange market, with official rates hovering near N1600/$, while the unofficial market ranged between N1620 and N1630/$. Despite the marginal improvement, domestic demand for dollars remains high, continuing to put pressure on the naira. Global demand for the dollar has declined following a sell-off in the U.S. Treasury market, but domestic factors, including tight liquidity and rising dollar demand, exacerbate the naira’s weakness.
Although the Central Bank of Nigeria (CBN) has provided optimistic data, the country’s foreign exchange market remains volatile. The naira’s challenges are compounded by rising uncertainty in the nation’s access to international debt markets, especially as the government looks to dollar-denominated instruments to address its growing budget deficit. Crude oil, which represents about 90% of Nigeria’s foreign exchange earnings, is also under pressure from declining prices, linked to global tariffs.
On the international front, the U.S. Dollar Index dropped to its lowest level since 2022, briefly touching 99.37, amid concerns about stagflation and trade tensions. Despite a modest recovery, the dollar remains under downward pressure, influenced by the increasing trade conflict between the U.S. and China. A recent 90-day tariff moratorium announced by former President Donald Trump, which excluded China, has further destabilized the greenback.
Though the dollar index showed signs of recovery, its impact on the naira remains limited. The ongoing volatility in both the global currency market and Nigeria’s forex market illustrates the country’s ongoing struggle with currency instability, despite global shifts in the dollar’s value. The situation reflects broader economic challenges, particularly for oil-exporting nations like Nigeria, facing new headwinds from fluctuating crude oil prices and global economic uncertainties.
Source: Naira metrics