Despite a steep decline in the U.S. dollar index, the Nigerian naira has failed to strengthen, continuing to trade at around N1,625 per dollar in the parallel market.
This comes as the dollar index slid by over 2.4% in two days, marking its lowest level since early October — a movement that usually signals relief for emerging market currencies.
However, the naira remains under pressure, reflecting persistent demand for dollars in Nigeria amid low foreign exchange liquidity. Market watchers say this demand is driven by Nigeria’s reliance on imported goods, falling oil prices, and investor concerns over the country’s economic outlook.
This disconnects between global currency trends and Nigeria’s FX market highlights the structural vulnerabilities in the Nigerian economy. While the Central Bank of Nigeria (CBN) announced a $6.83 billion balance of payments surplus and $21 billion in diaspora remittances for 2024, the data has yet to meaningfully strengthen the local currency.
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In response to market volatility triggered by new tariffs announced by U.S. President Donald Trump — which raised the effective rate on Chinese imports to 145% — the CBN disclosed it intervened with nearly $200 million from its reserves to prop up the naira.
These tariffs have sparked wider turbulence in global financial markets, leading to a sell-off in U.S. Treasuries and weakening the dollar.
Yet in Nigeria, the ripple effects have manifested as higher dollar demand and reduced access to global debt markets, with the federal government still seeking dollar-denominated borrowing to bridge its budget deficit.
The CBN has cautioned that oil-exporting nations like Nigeria are entering new economic territory, as oil prices dip in response to the shifting global trade landscape. With crude exports accounting for 90% of Nigeria’s foreign exchange earnings, any sustained drop in oil prices could deepen pressure on the naira.
Meanwhile, gold prices surged to over $3,235 per ounce on Friday — the highest on record — as investors flocked to safe-haven assets amid economic and geopolitical uncertainties. Gold’s rally comes on the back of its strongest quarterly performance since 1986.
Back in the U.S., recent inflation data showed a cooling trend, but Federal Reserve officials remain wary. Dallas Fed President Lorie Logan warned that the new tariffs could stoke inflation, complicate rate decisions, and potentially lead to job losses.
Although continuing jobless claims in the U.S. declined to 1.85 million, a slight increase in initial unemployment claims to 223,000 added to market jitters.
With the Fed maintaining a cautious stance and investors watching global developments closely, Nigeria’s naira appears to be caught in the crossfire of both local and international economic headwinds.