Nigeria’s foreign exchange market started the month on a shaky note as the naira fell sharply following comments from US President Donald Trump suggesting military action against Nigeria over alleged religious persecution.
The Nigerian naira, which had traded at a 2025 high of N1,421.73/$, dropped to N1,436.34/$ on Monday, according to data from the Central Bank of Nigeria.
This marks a 1.03 per cent decline or N15 loss in a single day.
Additionally, the Nigerian currency depreciated in the parallel market to N1,455/$, reflecting increased investor concern and pressure from foreign exchange demand.
The sudden depreciation came after a weekend of rising geopolitical tension following Trump’s designation of Nigeria as a “country of particular concern” on his Truth Social platform and his order for the US Department of War to prepare for “possible action” if alleged Christian killings continue.
Trump took this step in response to what he called a “Christian genocide” in Nigeria.
Nigeria’s dollar-denominated bonds performed the worst among emerging markets on Monday, according to Bloomberg, with all ten notes ranking among the underperformers worldwide. Bonds maturing in 2047 saw the biggest decline, dropping 0.6 cents to 88.26 cents on the dollar before easing later in the day.
President Trump blacklists the Nigerian government
Nigeria was designated a “Country of Particular Concern” by President Donald Trump through his official X account due to serious alleged violations of religious freedom, especially the murders of Christians by Islamist militants in the country’s north.
The U.S. president threatened to cut all US aid, valued at approximately $1.2 billion annually, along with directing the Pentagon to prepare for possible military action if the Nigerian government fails to act.
This rhetoric heightened geopolitical tensions and caused immediate market volatility amid Trump’s broader “America First” agenda,
The naira had earlier experienced an impressive rally in October 2025, appreciating more than 20 per cent against the haven currency. The increase was driven by rising external reserves, which reached $43.19 billion—up from $33 billion in January. The Central Bank of Nigeria (CBN) also implemented reforms, including stricter monetary policies.
U.S dollar index at a three-month high
The US Dollar Index (DXY), which compares the value of the US dollar (USD) to six major currencies, is trading at 99 during Tuesday’s London hours, extending its winning streak to its fifth consecutive session.
The cautious outlook on the US Federal Reserve’s (Fed) December policy supports the dollar. The Japanese yen fell from nearly eight-month lows after verbal warnings from Tokyo officials, while the dollar remained near a three-month high on Tuesday as traders reduced their interest rate bets amid a divided Federal Reserve.
Fed officials continued to express conflicting views on the economy’s condition and its risks, especially since economic data was paused due to the shutdown. Chair Jerome Powell suggested that last week’s rate cut by the Fed might be the final one of the year.
According to CME FedWatch, traders are now pricing in a 65 per cent chance of a rate cut in December, down from 94 per cent a week earlier. US manufacturing contracted for the eighth straight month in October, with new orders remaining subdued, according to reports from manufacturers in the Institute for Supply Management survey released Monday.
The CME FedWatch Tool shows that traders of Fed funds futures now assign a 65 percent chance of a rate cut in December, down from 94 per cent a week earlier.
Powell warned that policymakers might need to wait for official data to resume and emphasized that another rate cut in December is far from guaranteed. However, due to the ongoing government shutdown and market caution, which could worsen US economic concerns, the US dollar might face challenges. The US government shutdown has now extended into its sixth week with no clear resolution in sight.
The strong dollar dampens gold interest
Gold fell below $4,000 per ounce once more on Tuesday as the dollar held steady at more than three-month highs and the likelihood of another US interest rate cut in December.
The demand for bullion metal was dampened by China’s trade tensions. Due to uncertainty over the likelihood of another rate cut by the US Federal Reserve this year, the dollar increased to a three-month high versus the euro, building on its gains from the previous week.
The Fed lowered interest rates for the second time this year last week, but Chair Jerome Powell stated that another cut was “not a foregone conclusion” for this year.
