Crude oil prices have skyrocketed due to the ongoing US-Iran conflict, with Bonny Light hitting $120 per barrel this week.
Although Nigeria is a major crude oil exporter, the Naira is under pressure to decline because of the current landing costs for refined petrol (PMS), currently pegged at N1,168/litre, which raised the demand for dollars to finance these imports.
This import-driven demand is depleting the official market’s liquidity.
Although Dangote achieved a significant milestone in January 2026 by providing 62% of Nigeria’s PMS (petrol), the remaining 38% is still imported. The Central Bank and private marketers are still required to find billions of dollars to pay for these imports.
Furthermore, Dangote refinery still imports crude oil to maintain its production capacity.
- In addition, Nigeria’s headline inflation is expected to slightly increase to 16.22 percent for March and April after declining for 11 straight months.
- A mild sell-first mentality in the Nigerian currency has resulted from this reversal, which has alarmed some traders who were placing bets on a single-digit inflation target by mid-year.
- European refiners are rushing in for Nigerian crude amid the obstruction of the Strait of Hormuz, a vital energy route.
The Naira’s latest price action highlighted that it is struggling against the psychological level of N1,380/$: The NNPC and private marketers are having to source enormous amounts of foreign exchange to cover those N1,168/litre landing costs to keep the country fueled.
Bonny Light reached an intraday high of $134.72 last week; however, Nigeria’s oil production remains tepid at 1.48 million barrels per day, far below the 1.84 million budget target, so the Oil windfall isn’t helping the local currency in Nigeria’s foreign exchange market as much as anticipated.
The mid-term outlook for the naira remains neutral. The Naira began the second quarter of 2026 with modest gains amid steady sales of CBN dollars and improved supply from foreign investments, remittances, and oil revenues
Monetary reforms like the Electronic Foreign Exchange Matching System (EFEMS) and initiatives to unify exchange windows have significantly reduced-price volatility compared to 2023–2024. Thus, the Nigerian currency has stayed within a narrow range (roughly N1,340 to N1,430 earlier in the year), avoiding the severe depreciations observed in previous periods.
Nigeria’s foreign reserves are bolstered by Bonny Light recent price action, but the immediate expense of importing refined fuel is acting as a dark cloud, causing the Naira’s value to decline relative to the dollar. As the second quarter of the year picks up steam, markets indicate that the current rate represents a balanced demand-supply dynamic.
U.S dollar index ticks north in foreign exchange market
The US Dollar Index, which compares the value of the US dollar against a few major currencies, is holding near 100.00 during the London trading session after recording losses the previous day.
- The haven currency gains support due to increased demand for haven assets amid uncertainty on peace negotiations and the Iran conflict. US President Donald Trump threatened to attack Iranian bridges and power plants if his demands weren’t met by Tuesday at 8:00 PM Eastern Time.
- The US president stated on Monday that the most recent proposal for a US ceasefire with Iran is “not good enough,” ahead of his deadline for Iran to reopen the Strait of Hormuz.
Trump said, “They’re negotiating now, and they’ve made a very significant step, but it’s not good enough.” We’ll see what happens. As the war in Iran drives energy prices higher, the US dollar gains support, raising concerns about US inflation and prompting a more aggressive Federal Reserve.
According to CME Group’s FedWatch Tool, there is a 99.5 percent chance the Fed will keep rates unchanged at the April meeting. Traders are now closely watching the most recent Federal Open Market Committee (FOMC) Meeting Minutes for more precise guidance on the central bank’s policy direction.
