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.

The CPI rose to 125.9 in July from 123.4 in June, reflecting a 2.5-point increase. Year-on-year, inflation dropped sharply by 11.52 percentage points from 33.40% in July 2024. However, month-on-month, headline inflation climbed to 1.99%, up from 1.68% in June, indicating a faster pace of price increases.

Urban inflation stood at 22.01% year-on-year, down from 35.77% in July 2024. Food inflation eased to 22.74% year-on-year, 16.79 percentage points lower than the 39.53% recorded a year earlier. On a monthly basis, food inflation fell slightly to 3.12% from 3.25% in June, largely due to lower prices of key items such as vegetable oil, local rice, and maize flour.

By state, Borno (34.52%), Niger (27.18%), and Benue (25.73%) recorded the highest year-on-year inflation rates, while Yobe (11.43%), Zamfara (12.75%), and Katsina (15.64%) posted the lowest. Month-on-month, Borno (6.11%), Zamfara (5.72%), and Kano (4.31%) saw the steepest increases, while Bauchi (0.26%), Katsina (0.30%), and Anambra (0.37%) recorded the smallest rises.

As South Africa braces for yet another devastating electricity price increase this month, with municipalities implementing NERSA-approved tariff hikes of 11.32% from 1 July 2025, UTCS (Utility Consulting Solutions) is positioning itself as the critical solution for businesses and municipalities struggling to manage spiralling energy costs.

The latest round of increases, following Eskom’s 12.74% hike for direct customers implemented in April 2025, represents a crushing blow to consumers and businesses already reeling from electricity costs that are rising at more than double the Consumer Price Index.

When electricity tariffs surge by over 11% while salary increases lag far behind at conventional inflationary rates, an unsustainable economic gap emerges that threatens stability across all sectors.

The 2025 tariff increases bring more than just higher prices – they introduce a fundamental restructuring of how South Africa’s 165 licensed municipal electricity distributors purchase and distribute power.

All bulk supply options have been consolidated into a single tariff structure called “Municflex,” forcing municipalities to completely rethink their electricity procurement strategies.

“We’re witnessing a seismic shift in South Africa’s electricity landscape,” said Christo Nicholls, CEO of UTCS. “The traditional approach of simply passing increased costs to consumers is no longer sustainable. Municipalities and businesses need sophisticated, technology-driven solutions to navigate these complex new tariff structures while keeping electricity affordable for their communities and operations.”

UTCS has developed a comprehensive solution that transforms how organisations approach electricity procurement and management.

The company’s Digital Energy Platform has already facilitated the trading of over 1.5 million units of unused electricity back into local grids, demonstrating the massive potential for smart energy management.

“Our platform doesn’t just help customers buy electricity – it helps them become electricity traders,” explained Nicholls, “We’ve successfully created harmony between fit-for-purpose technology, compliant legislation, and pragmatic institutionalisation. This isn’t just about cost savings; it’s about fundamentally changing how South Africa approaches energy security.”

UTCS addresses the complex needs of municipalities through bespoke legislative-compliant electricity day-trading software that operates like stock trading for electricity.

This sophisticated platform provides real-time market analysis enabling municipalities to purchase bulk electricity at optimal rates, while advanced forecasting tools help navigate the intricate new Municflex tariff structure.

The company’s specialised consulting services ensure full NERSA compliance throughout the transition process.

For businesses and consumers, UTCS delivers smart timing strategies for electricity purchases that help avoid expensive tariff blocks, maximising cost efficiency within the new rate structures.

The platform seamlessly integrates rooftop solar installations with unused energy trading capabilities, allowing clients to sell excess power back to the grid.

Through comprehensive energy audits and consumption optimisation services, combined with extensive education on alternative electricity trading methods, UTCS empowers clients to transform from passive consumers into active energy market participants.

UTCS’s approach aligns with South Africa’s broader just energy transition goals, ensuring that technological solutions benefit all stakeholders.

The company’s framework makes smart energy management accessible to small municipalities and large corporations alike, democratising access to sophisticated energy trading tools.

“When we say ‘affordable electricity for all,’ we mean it,” Nicholls emphasised. “Our technology stack removes the complexity of energy trading while ensuring full regulatory compliance. We’re not just helping our clients save money – we’re helping them take control of their energy future.”

With the July 1 implementation date for municipal tariff increases now here, UTCS is urging businesses and municipalities to act immediately.

The company is offering expedited consultations and implementation services to help clients navigate the initial impact of the new tariff structures.

“The old model of electricity consumption is broken,” concluded Nicholls. “Rising costs, complex regulations, and limited supply options have created a perfect storm. But within this crisis lies unprecedented opportunity for those willing to embrace alternative thinking. The question isn’t whether electricity costs will continue rising – it’s whether you’ll be prepared to thrive despite them.”

The Consumer Price Index (CPI) annual percentage change in value is known as inflation.

It accurately gauges how much a portfolio of goods and services’ prices vary over the course of a year. The CPI for 2022 increased to 15.60 percent (year-on-year) January 2022 by records from the Nigerian Statistics.

Based on the National Bureau of Statistics (NBS), Nigeria’s inflation rate increased from 9.0 percent in 2015 to 17.71 percent as at May 2022 (year on year).

It is obvious that over the years the value of money in Nigeria have been falling thereby causing negative impact. Usually, this inflation is expected to reduce purchasing power by 2 percent or 3 percent to bounce back to stability but it seen that the inflation in Nigeria has risen above 10 percent.

In a state like this, Nigeria is gradually tilting to hyper-inflation thereby reducing the value of the Naira. Over the past 10 years, Nigeria have long struggled with a general increase in the cost of food, goods, and other necessities as well as a decline in buying power which has barely retraced the market.

Inflation rates of 2 percent to 3 percent assist an economy because they stimulate consumers to take out more loans and make more expenditures because interest rates are also held at historically low levels at these levels.

How is Inflation caused?

Inflation is brought on by the following among others:

●       Changes in the cost of production and distribution.

●       An imbalance in the money supply and demand.

●       An increase in the tax rate on goods.

As it is known, the value of money decreases when the economy undergoes inflation, which is an increase in the price of goods and services which as a result, a given unit of currency now buys less products and services.

Implications of Inflation

According to data from the Nigeria Bureau of Statistics (NBS), the economy made improvement in 2022’s first quarter, as evidenced by a 3.1% growth in Gross Domestic Product (GDP). Both individuals and the nation as a whole are impacted by this high inflation.

The effects on consumers are the harshest – people can no longer maintain a budget since their income is so low. Consumers find it challenging to purchase even the necessities of life due to the high cost of everyday goods. They are forced to request higher pay as a result, which gives them no choice.

Inflation Control

In order to manage inflation, the government and the central bank typically regulate economy through monetary and fiscal policies. Monetary policy is the principal strategy employed (interest rates fluctuation).

However, inflation can be controlled with the following measures:

1. Monetary policy:-

Reduced economic growth and lesser inflation are the results of lower demand due to higher interest rates.

Interest rates can be raised by the central bank in reaction to inflation. Borrowing becomes more expensive and saving becomes more appealing at higher interest rates. Residents will have to make higher lease payments, which would leave them with less money to spend.

Consequently, households will be less able and less motivated to spend. Businesses will invest less because corporations won’t be as likely to borrow to finance investments.

Therefore, increased interest rates have a significant impact on slowing down investment and consumer expenditure, which results in a slower economic growth rate – inflation also slows down as economic development does.

2. Money supply control:- 

According to monetarists, there is a direct correlation between the money supply and inflation, hence reducing the money supply can indirectly reduce inflation. Reducing inflation should be possible if the expansion of the money supply can be managed.

Measures advised by the monetary school of thought include; budget deficit reduction (deflationary fiscal policy), elevated interest rates (contracting monetary policy) and government’s ability to control the currency type and quantity it issues.

3. Supply side fiscal policies:- 

Initiatives to make the economy more efficient and competitive, which will drive down long-term expenses as inflation is frequently brought on by ongoing cost increases and weak competition.

The economy may become more competitive and inflationary pressures may be reduced with the aid of supply side policies. For instance, more accommodating labor markets, industries and production activities might help ease the strain on inflation.

However, supply-side initiatives may take some time to implement in Nigeria due to the time required for construction and setting up manufacturing operations. In the meantime, this is likely ineffectual against inflation caused by growing demand.

4. Fiscal policy on tax increment:- 

Increased income taxes may have a moderating effect on demand, spending, and rising inflation.

Taxes (such as VAT and income tax) can be raised thus decreasing spending by the government to lower inflation. By lowering demand in the economy, this serves to improve the government’s budget condition.

These two measures both slow the expansion of the overall demand, which lowers inflation. Also, reduced Aggregate Demand (AD) growth can lower inflationary pressures without triggering a recession if economic growth is fast.

5. Wages and price control:- 

Theoretically, attempting to restrict wages and prices could assist in lowering inflationary pressures. However, because they are mostly ineffective, they are not frequently employed. Limiting wage growth can aid in containing inflation if wage inflation (produced, for example, by strong unions negotiating for higher real wages) is the primary cause of inflation. Lessening wage growth will lower business expenses and result in a decline in the economy’s excess demand. However, it can be challenging to control inflation through income programs, especially if the unions are strong. Furthermore, pay regulation calls for broad economic cooperation, but businesses that are experiencing a labor shortage will be more motivated to hire staff, even if it means going above and beyond government salary limits.

6. Global investment and exportation:- 

Nigeria investing in remunerative products such as oil-investment can help manage inflation less importation and increased exportation can give the Naira a worthy valuable.

Nigeria becoming a producer nation should not be overlooked as currently, the least of items are even imported. Exchange rates and other importation policies contribute to decreasing the purchasing power of consumers.

As interest rates rise, the value of currencies should rise as well (higher interest rate attracts hot money flows) Inflationary pressure will also be lessened by the exchange rate appreciation through lower cost of imports.

As a result of the decreased demand for exports and resulting lower overall demand in the economy, the price of imported commodities (such as gasoline and raw materials) would fall. Since exports become less competitive than domestic markets, exporting businesses will be motivated to reduce expenses and raise competitiveness over time.

By affiliating with a fixed exchange rate system, a nation may aim to keep inflation low. According to the reasoning, keeping inflation under control requires discipline, which can only be achieved if a currency’s value is fixed (or semi-fixed). The currency would start to decline if inflation increased because it would lose its appeal.

7. Demonetization and reissuance of money:- 

Conventional policies might not be suitable during a hyperinflationary environment. It can be difficult to alter future inflation expectations. It could be necessary to adopt a new currency or utilize another one, like the dollar, when people have lost faith in a certain currency as in the case of Zimbabwe. The issue of replacing the existing currency with a new one is the most extreme monetary measure. A fresh note is substituted for numerous old notes of money in this manner.

The valuation of deposit accounts is also determined in this manner. A measure like this is implemented when there is an excessive amount of note issuance and hyperinflation takes place in the area.

This measure has had great success. When a nation has an abundance of illicit currency, this action is frequently taken.

About the Author

Emmanuel Otori has over 9 years of experience working with 100 start-ups and SMEs across Nigeria. He has worked on the Growth and Employment (GEM) Project of the World Bank, GiZ, Consulted for businesses at the Abuja Enterprise Agency, Novustack, Splitspot and NITDA. He is the Chief Executive Officer at Abuja Data School.