The Nigerian currency is bracing for challenges as the U.S. dollar surges following Donald Trump’s return to the U.S. presidency.
The naira traded at N1,678/$ on the official market last Friday, a loss of N39 from Thursday’s rate of N1,639/$.
Data from FMDQ indicates that the naira has shed over 70% of its value against the dollar since its free-market adjustment in June 2023, a move aimed at restoring investor confidence in the Nigerian economy.
Some prominent companies with dollar-denominated obligations have reported significant losses due to the naira’s sharp devaluation.
Among them, Nigerian Breweries and Nestlé Nigeria saw increased liabilities due to their dollar exposure.
Nigerian Breweries and Nestlé Nigeria saw increased liabilities due to their dollar exposure.
A recent survey by the Central Bank of Nigeria (CBN) revealed that Nigerian businesses expect further naira depreciation through December, with recovery anticipated next year.
The administration of President Tinubu launched a bold effort to overhaul Nigeria’s exchange rate policies to attract investors and stimulate economic growth.
The objective was clear: modernize currency valuation methods to drive investment.
As U.S. President-elect Donald Trump assumes office on January 20, 2025, his administration is expected to influence global markets.
Trump’s well-known “America First” policy, which prioritizes energy independence, could lead to lower oil prices if U.S. domestic production rises, squeezing Nigeria’s oil revenue and placing additional pressure on the naira.
Analysts suggest a stronger dollar may be likely under Trump, potentially driven by high tariffs and protectionist policies.
Additionally, while the Federal Reserve continues its interest rate cut cycle, some traders expect a stronger greenback to prevail in 2025 with Trump’s return, potentially pushing the naira into the N2000/$ range.
Trump’s administration could also alter U.S. investment in Africa. While Trump’s skepticism about foreign aid may reduce U.S. development assistance, expansion of programs like “Prosper Africa” could improve liquidity in Nigeria’s foreign exchange market.
There is still a good chance that a divided legislature will extend the tax cuts if the Republicans cannot win a majority in the House.