The naira dipped against the safe-haven currency at the official market amid rising oil prices in global markets.
FMDQ data showed that the Nigerian naira fell from N1,548.89/$1 on Monday to N1,549.65/$1 on Tuesday, January 14, 2025.
The local currency traded within the N1,660–1,665/$1 range at the unofficial market.
Naira bulls seem muted despite Brent crude breaking the $80 resistance level. Crude oil exports are a major source of FX income for the Nigerian economy.
The Joe Biden administration unveiled a comprehensive set of sanctions aimed at curbing Russia’s oil and gas earnings, which caused oil prices to spike earlier this week and reach a four-month high on Monday. Market experts are concerned that these sanctions may push Brent crude to rise to $90 per barrel due to tightening supply and the potential for increased demand from other sources.
Oil traders also expect strong winter fuel demand, despite the presence of large U.S. crude holdings and the persistent strength of the dollar.
Consequently, Naira bulls have softened their drive to break below the N1,500 level in the black market, amid an uptick in CBN FX holdings. Nigeria’s foreign reserves saw a remarkable gain of $7.69 billion, or 23%, year over year, between January 10, 2024, and January 10, 2025.
Nigeria’s external financial position has strengthened, as evidenced by the Central Bank’s increased FX assets, which ended the period at $40.08 billion, up from $33.08 billion at the start of 2024.
The dollar declined against major currencies on Tuesday but remained close to its highest level in over two years, making it difficult to predict the Federal Reserve’s next interest rate moves due to lower-than-expected inflation data after last week’s strong jobs report.
Traders are awaiting Wednesday’s consumer price index (CPI) report.
At the time of this report, the U.S. dollar index maintained its 109-index path. Investors have been closely monitoring the CPI data to determine whether economic indicators support the Fed’s cautious stance on rates.
The focus has shifted to President-elect Donald Trump’s policies, which analysts believe will stimulate growth and increase price pressures. U.S. Treasury yields have increased, and the dollar has been supported due to the threat of tariffs and the expectation of fewer Fed rate cuts. However, the market is now considering the possibility that the United States may raise tariffs gradually.
Scott Bessent, Trump’s Treasury nominee, is expected to focus on controlling deficits and using tariffs as a negotiating tool to mitigate the inflationary impact of the U.S. economic strategy.