Stronger Fundamentals Back Naira's Climb
The naira’s appreciation reflects improving macroeconomic fundamentals, with fresh inflation data from the National Bureau of Statistics (NBS) showing headline inflation declined to 22.97% in May, down from 23.71% in April. The 0.74 percentage point drop suggests that inflationary pressures may be peaking—a sign of economic stabilization that is lending support to the local currency.
Economist Bismarck Rewane of Financial Derivatives Company noted that the naira could oscillate between ₦1,600 and ₦1,650 per dollar on the official market through June and July. His outlook is underpinned by the Central Bank of Nigeria's ongoing efforts to tighten monetary policy and curb excess liquidity, which surged to a peak in May.
The rally in global oil prices has further strengthened the naira’s outlook, given Nigeria’s heavy reliance on crude oil exports for foreign exchange earnings. Increased oil receipts offer more firepower to the central bank in stabilizing the foreign exchange market.
Global Tensions Weigh on Dollar Strength
Meanwhile, the U.S. dollar dipped against major currencies—such as the euro, Swiss franc, and Japanese yen—amid growing unease over rising geopolitical tensions in the Middle East. The conflict between Israel and Iran has escalated, with Israel intensifying pressure on Iran to halt its nuclear program and calling for regime change. Rumors of increased U.S. military deployment in the region are fueling investor anxiety.
There are growing concerns over possible supply disruptions in the Strait of Hormuz, a key global energy chokepoint that handles nearly 20% of the world’s seaborne oil. Two oil tankers reportedly collided near the strait, sparking fires and prompting warnings from UK Maritime Trade Operations about possible electronic interference affecting ship navigation systems.
Iran, the third-largest OPEC oil producer at 3.3 million barrels per day, is seen as a critical piece in the global energy puzzle. Analysts believe that if Iranian output is disrupted, other OPEC members may be required to step in and cover shortfalls using surplus capacity.
Despite recent losses, the dollar had rebounded modestly—rising around 1% since last Thursday—buoyed by its traditional status as a safe-haven asset. However, the greenback remains down more than 8% year-to-date, weighed by President Donald Trump’s aggressive trade stance and unpredictable policy decisions, which have shaken investor confidence in the U.S. economy.
All Eyes on the Fed
Markets are now focused on the Federal Reserve’s interest rate decision, expected later Wednesday. While inflationary risks remain globally, especially with crude oil prices surging, recent data from the U.S. shows signs of a slowing economy. The Fed is widely expected to hold rates steady, but traders are watching closely for any signals regarding future monetary policy.
The U.S. will also release its weekly unemployment claims report, adding another layer of data for market participants to consider.
Additionally, Switzerland, Norway, and Sweden are slated to announce central bank decisions—moves that could further influence currency markets already on edge due to geopolitical and economic uncertainty.
As Nigeria’s currency gains strength at home and the global FX market remains volatile, the coming days will test whether the naira’s recovery can be sustained—and whether global financial systems can navigate the economic aftershocks of rising geopolitical conflict and cautious monetary policy moves.