The Central Bank of Nigeria (CBN) sold dollars on the official market Friday as it stepped in to bolster liquidity after the naira came under renewed pressure following fresh U.S. tariffs that rattled global markets and weighed on oil prices.
The apex bank intervened in the foreign exchange market with a $197.71 million sale to authorised dealers to halt the slide in the naira which fell 2.3 percent in three days.
Analysts, noting this was the CBN’s first “intervention” of the year, say it may signal the start of a series of actions if market conditions continue to deteriorate in the coming days.
The naira weakened by N35.77 at the official Nigerian Foreign Exchange Market (NFEM) between Wednesday and Friday, closing at N1,567.02 per dollar on April 4, compared with N1,531.25 on April 2, CBN data showed.
In the parallel market, the naira dropped to N1,565, down N15 from Wednesday, marking a torrid week for the currency.
The CBN’s intervention, disclosed in a statement signed by Omolara Omotunde Duke, director of the apex bank’s financial markets department, is part of “measured steps” to improve market liquidity and maintain order.
“This measured step aligns with the Bank’s broader objective of fostering a stable, transparent, and efficient foreign exchange market,” the statement read.
The move follows escalating foreign exchange pressures attributed to the global fallout from U.S. President Donald Trump’s latest tariff regime and sliding oil prices, twin developments that have unsettled investor sentiment in emerging markets.
The CBN said it had “noted recent movements in the foreign exchange market between April 3 and 4, 2025,” adding these reflected broader global macroeconomic shifts “currently affecting several emerging markets and developing economies.”
Trump’s tariff increase on imports from major economies including China and the EU triggered risk-off sentiment across global financial markets.
Brent crude fell 3.2 percent to $72.52 per barrel, while West Texas Intermediate slipped below the $70 mark. Nigeria’s Bonny Light has similarly traded lower, with prices sliding over 12 percent to approximately $65.50 per barrel.
The latest round of tariffs marks Trump’s most aggressive stance yet against what he perceives as an imbalanced global trade system. The move comes on the heels of earlier tariffs targeting countries like Canada, Mexico, and China.
A spike in foreign exchange demand is also stoking pressure on the naira.
A note by analysts at Afrinvest Securities cited the suspension of the Naira-for-Crude initiative as a driver of increased FX demand, with local refineries now competing with fuel importers for dollars.
The Naira-for-Crude initiative, launched by the government on October 1, 2024, allowed local refineries, notably the Dangote Petroleum Refinery, to purchase crude oil using the naira instead of U.S. dollars. This policy aimed to alleviate pressure on the naira, reduce transaction costs, and enhance the availability of petroleum products within Nigeria.
The initial six-month agreement concluded on March 31, 2025, with discussions ongoing regarding the potential renewal of the policy.
Afrinvest also tied the naira’s sharp depreciation on Thursday to Trump’s tariff announcement. The investment firm said that unless offset by a significant surprise, such as a spike in oil prices or a major inflow, near-term pressures on the naira are likely to persist.
Looking ahead, the firm expects potential upward momentum in crude prices in April, citing geopolitical tensions involving Iran and Russia, and a fresh 25 percent tariff on Venezuelan crude, which accounts for about 1.3 percent of global oil supply.
Still, Afrinvest warned that even a rebound in oil prices might not be enough to shield Nigeria’s FX reserves or the naira, given underlying structural pressures.
Nigeria’s gross external reserves slipped 0.3 percent to $38.17 billion as of April 2, down from $38.30 billion on March 28, according to CBN data.
Analysts caution that reserve levels could face further erosion in the coming weeks if current trends persist. (BusinessDay)
