The naira oscillated below the N1550/$ bandwidth at the unofficial market amid firm interest in the U.S. dollar index.
Present market action suggests that, despite elevated growth in the CBN’s FX holdings, the Nigerian naira cannot breach the $1,200 resistance line amid a fragile FX market.
Crude oil production, the nation’s main source of income, remains low and stagnant, indicating that the CBN’s recent attempts to stabilize the volatile market were insufficient to alter the naira’s downward trend.
The naira will face more selling pressure as demand for foreign exchange rises, particularly for foreign tuition fees, trips, and fuel imports.
Some market players have noted that the ongoing inability to resolve the naira-for-crude agreement between NNPCL and Dangote Refineries is likely to jeopardize the foreign exchange supply and slow the rate of inflation growth. The naira-for-crude contract negotiations, which were supposed to end on Monday, have been postponed for a few more weeks.
This policy permits local refiners to purchase crude oil in naira rather than U.S. dollars. The initiative was intended to increase domestic petroleum refining by reducing the strain on foreign exchange reserves, tame the high reliance on imported fuel, and boost the naira’s stabilization.
Nigeria’s net foreign exchange reserve was $23.1 billion in 2024, the highest amount in over three years. This figure reflected a significant improvement in the nation’s external liquidity, a reduction in short-term obligations, and a resurgence of investor confidence. The increase was up from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021, according to the CBN.
Dollar Firm Over U.S. President Donald Trump’s Upcoming Tariff Plans
The dollar remained unchanged in the London trading session on Wednesday as traders prepared for U.S. President Donald Trump’s upcoming tariff plans, which could influence the markets for the foreseeable future. Other currencies fluctuated within narrow ranges.
- The euro was last seen trading at $1.078, while the pound was at $1.29, easing in expectation for the White House Rose Garden speech scheduled for 2000 GMT, which is expected to announce new tariffs that could disrupt the global trade system.
- The U.S. Dollar Index, which measures the greenback’s strength against six major currencies, remained in the 104.20 area, with the greenback showing little reaction after soft economic data was released from the world’s largest economy.
- Trump has proclaimed April 2nd as “Liberation Day,” and White House spokesperson Karoline Leavitt stated that reciprocal tariffs would be applied to nations that impose duties on the United States. Immediately following Trump’s announcement, the tariffs would go into effect.
Any additional tariff headlines will likely influence sentiment and currency movements. Although the Washington Post reported that Trump’s aides were considering a plan that would raise duties on products from almost every country by about 20 percent, rather than targeting specific countries or products, details regarding the size and scope of the trade barriers set to go into effect are still unknown.
- A blanket tariff globally, capturing all the major trading partners with a 20%-25% tariff, would be seen as most aggressive and would likely elicit a strong risk-off reaction.
- Worries about the impact of an escalating global trade war on the world’s largest economy and a slew of weaker-than-expected U.S. data have stoked recession fears and, in turn, undermined the dollar this year.
A weak ISM manufacturing PMI print, coupled with a decline in job openings, puts the dollar in an uncertain position. The outlook for the dollar remains pessimistic as the market prepares for more economic data to be released later in the week.
