The Nigerian Naira has defied global market turbulence to emerge as the second best-performing currency in Africa year-to-date, trailing only the Zambian Kwacha.
However, this stability is facing a high-stakes test as geopolitical tensions in the Middle East send oil prices soaring and deplete national reserves.
According to Lukman Otunuga, head of Market Research at FXTM, the currency’s resilience in the face of conflict-induced volatility is commendable, though he warns it has come at a significant price.
“Nigeria’s foreign-exchange reserves have fallen for 16 consecutive days through April 8, falling to its lowest since mid-February at $48.94 billion,” Otunuga noted.
He highlighted that the Central Bank of Nigeria (CBN) has remained committed to its pledge to defend the local currency, even as deepening geopolitical risks punish emerging market assets globally.
The Hormuz Factor: Oil Hits Triple Digits
The global economy was jolted over the weekend as peace talks between the US and Iran concluded without a resolution.
Following 21 hours of failed negotiations regarding Iran’s nuclear program and the Strait of Hormuz, markets reacted sharply to threats of a naval blockade.
By Monday morning, Brent crude rallied 9%, surging to roughly $104 a barrel. The Strait of Hormuz, a critical maritime chokepoint, has been effectively closed since late February, raising the specter of severe supply shocks.
“Deepening conflict may keep oil prices elevated, with triple digits potentially becoming a new normal amid extreme supply tightness,” Otunuga cautioned.
Inflation Outlook: A Potential Pivot for the CBN?
Despite the global chaos, there is a glimmer of domestic hope on the data front. Nigeria is expected to release its Consumer Price Index (CPI) report for March this week, with analysts forecasting a dip in inflation to 13.4% year-on-year, down from 15.1% in February.
This potential cooling of prices could provide the CBN with the room it needs to shift its monetary policy.
“Persistent signs of easing inflationary pressures may encourage the CBN to cut rates in an environment where other central banks are considering hiking to tame conflict-induced inflation,” Otunuga explained.
Gold and Global Markets
While oil surges, gold remains under pressure. Despite a brief climb back above $4,700, Otunuga suggests that bears remain in control of the bullion market.
With expectations for rate cuts in 2026 diminishing, a stronger US dollar is likely to keep gold on the backfoot, with key support levels currently identified at $4,700 and $4,600.
As the week unfolds, the intersection of domestic inflation data and the volatile US-Iran standoff will likely dictate the direction of the Nigerian economy and the continued strength of the Naira.
