CBN Intervenes in FX Market as Naira Struggles Amid Trump Tariffs and Oil Price Drops
The Central Bank of Nigeria (CBN) stepped in to stabilize the foreign exchange market on Friday by selling $197.71 million to authorized dealers. This intervention aimed to prevent further depreciation of the naira, which had fallen 2.3% in just three days following the announcement of new U.S. tariffs. Analysts suggest this may signal the beginning of a series of interventions if the market conditions continue to deteriorate in the near future.
Between April 2 and 4, 2025, the naira weakened significantly, losing N35.77 at the official Nigerian Foreign Exchange Market (NFEM) and closing at N1,567.02 per dollar. The currency also dropped in the parallel market, falling to N1,565. The CBN’s intervention is part of a broader strategy to improve liquidity and maintain order in the market, aligning with the bank’s goal of fostering a stable and transparent foreign exchange system.
The renewed pressure on the naira is largely attributed to external factors, particularly the impact of U.S. President Donald Trump’s new tariffs, which have rattled global markets and weighed on oil prices. With the tariffs escalating risk-off sentiment among investors, the demand for foreign exchange has risen, further destabilizing the naira. Additionally, falling oil prices have compounded the situation, with Brent crude dropping by 3.2% to $72.52 per barrel, and Nigeria’s Bonny Light similarly losing 12%.
Pressure on Nigeria’s foreign exchange market has been exacerbated by the suspension of the Naira-for-Crude initiative, which had allowed local refineries to purchase crude oil in naira, reducing demand for dollars. The policy’s expiration on March 31, 2025, has led to increased competition for foreign currency, especially among fuel importers. While analysts foresee a potential rebound in oil prices, they caution that underlying structural pressures on the naira may continue to pose significant risks to Nigeria’s foreign exchange reserves and its currency stability.