The Nigerian naira continued its strong performance in the parallel market, breaking the N1,600/$ resistance level to trade between N1,585 and N1,590. This appreciation reflects improved economic fundamentals, with the latest data from the National Bureau of Statistics showing inflation dropped to 22.97% in May from 23.71% in April. Analysts, including Bismarck Rewane, anticipate the naira to trade between N1,600 and N1,650 at the official market, supported by tighter monetary policies and a rebound in oil prices.
Global factors also contributed to the naira’s strength, particularly the recent weakness in the U.S. dollar. The greenback fell against major currencies as geopolitical tensions escalated in the Middle East. The conflict between Israel and Iran has led to widespread investor caution, especially ahead of a critical interest rate decision by the U.S. Federal Reserve. The uncertainty has weakened the dollar’s appeal temporarily, helping other currencies gain ground.
The Israel-Iran standoff, sparked by Israel’s strikes against Iran’s nuclear infrastructure, has led to fears of broader regional instability. The U.S. is increasing its military presence in the region, raising concerns about possible disruptions in oil supply, particularly around the crucial Strait of Hormuz. A recent oil tanker collision near the strait and warnings about electronic interference have only intensified market jitters.
Amid these tensions, President Donald Trump has taken a hardline stance, demanding Iran’s “unconditional surrender” and ordering more fighter jets to the region. These developments have contributed to a rise in crude oil prices, which indirectly benefits oil-exporting nations like Nigeria. Higher oil prices support Nigeria’s foreign exchange reserves and strengthen the naira’s outlook in the short term.
Investors are now closely watching the U.S. Federal Reserve’s next move. With signs that the American economy is slowing, many traders expect interest rates to remain unchanged. The Fed’s decision, along with scheduled central bank announcements from Switzerland, Norway, and Sweden, will likely influence global currency movements in the days ahead.
Source: Nairametrics