Nigeria’s financial markets opened the week on a turbulent note, as renewed global trade tensions, sparked by fresh tariff threats from former United States President, Donald Trump, sent shockwaves through emerging economies.
On Monday morning, both the bond and currency markets in Nigeria experienced heightened volatility, reflecting a broader selloff that swept across international financial markets.
In a bid to curb escalating pressure in the foreign exchange (FX) market, the Central Bank of Nigeria (CBN) intervened with a substantial sale of $124 million at exchange rates ranging from N1,595 to N1,611 per dollar before 10 a.m. This follows an earlier intervention of $197 million on Friday, highlighting the apex bank’s more assertive posture in defending the naira. Despite these efforts, the naira remained under strain, with surging demand and limited dollar supply pushing exchange rates even higher. The resulting imbalance signals growing uncertainty in the FX market, fuelled by both domestic liquidity concerns and external shocks.
Meanwhile, Nigeria’s Eurobonds faced sharp declines, with prices plunging by up to $5 and yields spiking to 12%. This significant jump in borrowing costs suggests increased investor caution, not necessarily due to Nigeria’s fundamentals, but rather global risk aversion driven by geopolitical developments.
The selloff intensified over the weekend and into Monday’s global trading sessions, as investors fled risk assets amid fears of a renewed global trade war. Trump’s announcement of sweeping new tariffs—including a proposed 10% blanket duty on all imports, as well as targeted levies on goods from China and Mexico—spooked markets worldwide. According to the Financial Times, futures tied to the S&P 500 and Nasdaq plummeted by 3.1% and 3.4% respectively.
The CBN’s cumulative intervention of nearly $321 million over just three trading days signals a dual strategy: plugging short-term liquidity gaps and stemming potential panic. However, with external headwinds intensifying, market analysts say a more comprehensive and transparent FX policy may be necessary to reassure both local and foreign investors.
In the debt markets, rising Eurobond yields could complicate Nigeria’s efforts to access international capital, especially as the federal government looks to external borrowing to bridge its fiscal deficit and finance critical infrastructure projects.
Higher borrowing costs could also place additional pressure on the government’s debt servicing obligations, straining an already tight fiscal framework.
While Nigeria’s economic fundamentals remain largely intact, the current turbulence accentuates the country’s vulnerability to global financial shocks. In the coming weeks, the interplay between domestic monetary policy and international market sentiment will be critical in determining the stability of the naira and the wider economic outlook.