The Nigerian naira has taken a hit, depreciating sharply against the US dollar following a series of threatening comments from US President Donald Trump. Trump’s remarks, which suggested possible military action against Nigeria over alleged religious persecution, have heightened geopolitical tensions and caused market volatility.
The Fallout
The naira fell to N1,436.34/$ on Monday, a 1.03% decline or N15 loss in a single day. This marks a significant reversal of the currency’s impressive 20% rally in October, which was driven by rising external reserves and stricter monetary policies implemented by the Central Bank of Nigeria (CBN).
Dollar Dominance
The US dollar index (DXY) is trading at 99, extending its winning streak to its fifth consecutive session. The dollar’s surge is supported by the cautious outlook on the US Federal Reserve’s December policy, with traders pricing in a 65% chance of a rate cut. However, Fed Chair Jerome Powell warned that another rate cut is far from guaranteed, citing uncertainty over the economy’s condition and risks.
Bond Market Hit
Nigeria’s dollar-denominated bonds performed poorly among emerging markets, with all ten notes ranking among the underperformers worldwide. Bonds maturing in 2047 saw the biggest decline, dropping 0.6 cents to 88.26 cents on the dollar.
What’s Next?
The ongoing government shutdown in the US and market caution may pose challenges to the dollar’s continued strength. Meanwhile, the CBN’s efforts to stabilize the naira and improve foreign exchange liquidity will be closely watched by investors. As the situation unfolds, one thing is certain – the naira’s future will be shaped by the complex interplay of global economic trends and domestic policy decisions ¹.
