By Lukman Otunuga, Head of Market Research, FXTM.
The Naira is the second best performing African currency against the dollar year-to-date, only surpassed by the Zambian Kwacha.
Lukman Otunuga
Its stability through conflict-induced volatility is commendable, but such has come at a heavy cost. Nigeria’s foreign-exchange reserves have fallen for 16 consecutive days through April 8 – falling to its lowest since mid-Feb to $48.94 billion. The CBN followed its pledge to defend in the local currency in March as deepening geopolitical risk punished emerging market assets.
On the data front, it’s a big week for Nigeria due to the incoming inflation report for March.
Nigeria’s CPI is expected to have eased to 13.4% yoy from the 15.1% in February. Persistent signs of easing inflationary pressures may encourage the CBN to cut rates in an environment where other central banks are considering hiking to tame conflict-induced inflation.
Over the weekend, US-Iran peace talks concluded without a resolution.
Despite a marathon 21 hours of negotiations, both sides were unable to agree on key issues, including Iran’s nuclear program and its control of the Strait of Hormuz.
Hours after Trump threatened to block the Strait of Hormuz from Monday 10 am ET.
This fresh uncertainty was reflected across markets this morning, with risk aversion affecting equities, while oil benchmarks surged amid rising geopolitical risk premiums.
Given how Iran has rejected US restrictions on shipping and threatened Gulf ports, sentiment remains fragile and highly sensitive with markets on high alert.
It’s worth noting that the Strait of Hormuz has been effectively closed since late February, raising the risk of inflation and growth shocks that threaten the global economy.
In the commodity space, oil benchmarks surged as the US vowed to blockade all vessels passing through the Strait of Hormuz. Brent rallied as much as 9% to roughly 104$ a barrel as supply shock fears returned with a vengeance. Deepening conflict may keep oil prices elevated, with triple digits potentially becoming a new normal amid extreme supply tightness.
Gold initially declined on rising inflation concerns as oil prices surged. Despite prices jumping back above $4700 bears remain in control amid rising inflationary risks. Given how expectations have basically diminished over lower rates in 2026, gold is likely to remain on the backfoot with a stronger dollar keep bears in the game. Key levels of interest can be found $4825, $4700 and $4600.
