The Nigerian currency oscillated between the N1,620.25/$ support line in the unofficial market amid the resurgence of the dollar in the global financial market.
The naira’s depreciation was driven by demand-side concerns, with individuals and businesses rushing to buy dollars to meet necessities and import obligations.
However, recent fundamentals in Nigeria’s oil industry paint a bright prospect for the naira.
Nigeria’s crude oil production reached a two-month high in April, indicating that the continent’s biggest oil producer made progress toward recovery. It was still below the nation’s official quota, which was set by the Organization of the Petroleum Exporting Countries (OPEC).
Africa’s leading oil producer posted an average output of 1.486 million barrels per day last month, up from 1.401 million bpd in March, according to data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The data brings some relief to naira-denominated investors, though it still isn’t enough to meet the OPEC quota of 1.5 million barrels per day for the same time frame.
The Nigerian federal government remains firm in its stance regarding the advance sale of crude and refined products in naira (naira-for-crude) as part of broader measures to control the crude oil-linked currency deficit, encourage local refining activities, and strengthen the country’s fuel security.
This was reported at a follow-up meeting of the technical subcommittee on the initiative, which took place on Thursday in Abuja as part of a meeting chaired by Mr. Wale Edun, Coordinating Minister of the Economy.
The meeting evaluated execution targets and observed that the in-depth discussions during the last engagement were quite productive. The steps outlined in the milestone were met, as stated by Mohammed Manga, Director of Information and Public Relations of the Ministry of Finance.
U.S. Dollar Shows Strength
The dollar soared on Monday following news that the United States and China reached a tentative agreement to lower tariffs, alleviating fears that a trade war between the two countries could trigger a worldwide recession.
- The US will reduce its tariffs on imported goods from China, which had been as high as 145% since April, to 30%. In return, China will cut duties on US imports from 125% to 12% for 90 days. This surpasses what investors had anticipated, as most expected a round of discussions with no concrete commitments.
- The dollar index, which compares the greenback’s strength against major currencies, including the yen and euro, increased by 1.5%, with the dollar gaining 2.19% against the Japanese yen, reaching 148.5, a record high since April 3.
- The dollar has strengthened over the past three weeks due to growing optimism over prospective trade deals, though it is still down 2.2% since April 2, the date when Trump announced sweeping tariffs, triggered by his erratic policies and subsequent exemptions that undermined confidence in US assets.
The impending US Consumer Price Index (CPI) data, scheduled for release on Tuesday, and the April retail sales data, which will be disclosed on Thursday, are critical indicators of the impact the global trade conflict has had on the economy and the potential for subsequent interest rate adjustments by the United States Federal Reserve.
Traders lowered their expectations of rate cuts by the Fed and the European Central Bank as economic prospects improved after the Sino-US trade agreement.
Markets now expect the Fed to make its first cut of at least 25 basis points (bps) at its September meeting, in contrast to last week’s July outlook.
India and Pakistan declared a ceasefire following four days of market-shaking nuclear-powered combat.
Ukrainian President Volodymyr Zelensky announced he was ready to speak directly with Russian President Vladimir Putin. The two countries would engage in negotiations for the first time since the early months of Russia’s 2022 invasion.
