The Nigerian naira opened Tuesday’s trading session at N1,510 per dollar on the black market, reflecting a decline despite weakness in the dollar index.
However, the local currency showed a slight improvement in the Nigerian Foreign Exchange Market.
According to data from the Central Bank of Nigeria (CBN), the indicative exchange rate for the naira dropped from N1,500 per dollar on Friday to N1,499/$ in Monday’s trading session. This comes after three consecutive days of appreciation last week, during which the naira remained relatively stable due to ongoing foreign exchange market reforms.
Despite this, the naira lost value in the official market, recording its weakest session of the week at N1,498.98 per dollar. CBN data indicated a decline of N6.49 from Friday’s settlement rate, representing a 0.43 percent drop from its previous closing price of N1,492.49/$.
CBN Governor has reiterated the importance of maintaining the naira’s stability and has assured continued intervention in the foreign exchange market while promoting transparency. The introduction of the Nigerian Foreign Exchange Market FX Code and the Electronic Foreign Exchange Matching System has improved market efficiency, reducing volatility and speculation by enhancing liquidity.
On the global front, the dollar index experienced a significant drop due to unexpected declines in U.S. consumer spending and rising geopolitical tensions. The currency markets were rattled after a heated exchange between former U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky led to the abrupt cancellation of a scheduled press conference. Trump’s warning, “You are gambling on World War III, but you don’t have any cards in right now,” triggered a rush to safe-haven assets.
February marked the dollar index’s steepest monthly decline since September, closing nearly 1 percent lower. Market uncertainty was further fueled by diplomatic tensions between the U.S. and Ukraine, particularly after a planned agreement on rare earth elements collapsed.
The fallout from these developments raises concerns over potential retaliatory actions from China, which dominates the rare earth market. Beijing could target U.S. agricultural exports in response to tariffs, sparking fears of another trade war that could disrupt global trade balances and increase currency market volatility.
The dollar index, which measures the strength of the greenback against six major currencies, dropped by 13 basis points on Tuesday following the implementation of Trump’s trade tariffs. His warning about potential tariffs on the European Union heightened concerns, particularly after new levies were imposed on China, Canada, and Mexico.
Meanwhile, shifting market expectations on interest rates were reflected in the 10-year U.S. Treasury yield’s rise above 4.20 percent. Although higher yields typically strengthen the dollar, traders are increasingly betting on a rate cut in June. Despite growing anticipation for a policy shift, Federal Reserve officials have signaled a cautious approach, keeping the outlook for sustained dollar strength uncertain.
