Naira stability comes at high cost amid global volatility — FXTM analyst
Lukman Otunuga, Head of Market Research at FXTM Academy, has said the relative stability of Nigeria’s currency, the naira, in the face of conflict-driven global volatility is commendable but has
Lukman Otunuga, Head of Market Research at FXTM Academy, has said the relative stability of Nigeria’s currency, the naira, in the face of conflict-driven global volatility is commendable but has come at a significant cost.
Otunuga noted that the naira currently ranks as the second best-performing African currency against the dollar year-to-date, trailing only the Zambian kwacha.
In an interview, he disclosed that Nigeria’s foreign exchange reserves declined for 16 consecutive days through April 8, dropping to $48.94 billion, the lowest level since mid-February.
He explained that the Central Bank of Nigeria (CBN) has upheld its commitment to defend the local currency, particularly in March, as escalating geopolitical tensions weighed heavily on emerging market assets.
On domestic data, Otunuga described it as a significant week for Nigeria with the anticipated release of the March inflation report. He projected that the Consumer Price Index (CPI) would ease to 13.4 percent year-on-year from 15.1 percent recorded in February.
According to him, sustained signs of easing inflationary pressure could provide room for the CBN to consider interest rate cuts, even as other central banks globally are leaning towards tightening to contain inflation triggered by geopolitical conflicts.
He further pointed to unresolved tensions in the Middle East, noting that recent talks between the United States and Iran ended without agreement after 21 hours of negotiations, particularly on issues surrounding Iran’s nuclear programme and control of the Strait of Hormuz.
The lingering uncertainty, he said, has unsettled global markets, with risk aversion dragging equities while oil prices surged on heightened geopolitical risk.
Otunuga added that Iran’s rejection of U.S. shipping restrictions and threats to Gulf ports have kept market sentiment fragile, warning that developments around the Strait of Hormuz — a critical global oil route — continue to pose risks to inflation and economic growth worldwide.
In the commodities market, he noted that oil prices rallied sharply, with Brent crude rising by as much as nine percent to about $104 per barrel amid renewed fears of supply disruptions. He warned that prolonged conflict could sustain elevated oil prices, potentially keeping them in triple-digit territory.
On gold, Otunuga said prices initially declined due to rising inflation concerns linked to surging oil prices. Although gold rebounded above $4,700, he maintained that bearish sentiment persists, driven by expectations of prolonged higher interest rates and a stronger dollar.
He identified key price levels to watch at $4,825, $4,700, and $4,600.
