Naira Depreciates Further as Oil Prices Drop Below Key Levels Amid Global Tariff Tensions

• As global oil markets react to rising geopolitical tensions, Nigeria’s foreign exchange market is feeling the heat.
• The ongoing tariff dispute, especially between the United States and China, is sending shock waves, and economists state that Nigeria is very vulnerable
• The naira has depreciated again in the last week, crashing against the dollar in the parallel market

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

The naira is facing fresh pressure following a sharp drop in Nigeria’s oil revenues, sparked by growing global tensions around U.S. tariffs.

The latest round of tariff moves by former U.S. President Donald Trump has led to volatility in global oil markets, triggering a decline in crude oil prices.

As oil earnings fall, Nigeria’s foreign exchange market has come under intense strain, with the Central Bank of Nigeria (CBN) intervening to stabilise the naira.

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Despite the CBN selling approximately $634.85 million to authorised banks last week, the efforts proved insufficient to halt the naira’s decline.

The Nigerian currency fell by 2.3% week-on-week to close at N1,603.78/$1. In the parallel market, it dropped further by 3.4% to N1,600/$1.

Forward market rates also declined significantly:

• 1-month contracts: -3.0% to N1,670.42/$1
• 3-month contracts: -3.6% to N1,752.18/$1
• 6-month contracts: -5.2% to N1,870.78/$1
• 1-year contracts: -7.5% to N2,087.66/$1

FX reserves decline again

Meanwhile, Nigeria’s FX reserves fell by $102.14 million in one week, a 0.3% drop, leaving total reserves at $38.04 billion. This is despite heavy interventions by the CBN to stabilise the market.

Experts blame the ongoing U.S.-China trade tensions and a potential global recession for the turbulence. OPEC’s move to fast-track production ramp-up has also stoked fears of an oil glut, which could further suppress oil prices.

A research note by J.P. Morgan titled Frontier Local Markets Strategy: Reducing Risk further urged investors to close their Nigerian treasury bill positions as Brent crude approached sub-$60 levels.

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The SUN reports that the note warned that Trump’s tariff sweep may drag global markets below break-even oil prices, compounding Nigeria’s exposure.

What Analysts Are Saying

Despite CBN’s interventions, market analysts believe the naira may remain under pressure unless Nigeria diversifies its economy and attracts more foreign direct investment.

Jolomi Odonghanro, who is the Head, Research and Strategy at Cordros Capital, an investment firm based in Lagos, stated that Nigeria's fx market is quite vulnerable to global shocks and this could trigger continued capital outflows.

He noted that the current situation with oil prices could further deplete the country's oil earnings and lead to a trade deficit, which the CBN interventions would be unable to sustain.

Dr. Ifeanyi Okechukwu, an economist at Lagos Business School, also cautioned:

“Trump wants cheap crude oil and so the level of optimism for the economy should be a cautious one.”

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Naira appreciates after days of losses

In related news, Legit.ng reported that the naira had a positive trading day after several days of losses.

New data from the Central Bank of Nigeria showed that in the Nigerian Foreign Exchange Market (NFEM), the naira closed at N1,612.97/$1 on Tuesday, April 8, 2025.

The value of Nigeria's naira appreciated against the US dollar after enduring losses for days in both official and unofficial markets.

Proofreading by James Ojo, copy editor at Legit.ng.

Source: Legit.ng