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US President Donald Trump’s reciprocal tariffs which resulted to a 14.0% import tariffs on Nigeria and rattled global markets, is putting pressure on the naira amid risk off sentiment.
Brent crude price has declined by 14.2% (YTD) feeding into the Nigerian FX market which been negatively affected by offshore investors’ flight to safety as increasing domestic dollar demand put pressure on the Naira.
The naira has a 1-month return of -8.6% and year-to-date of -5.8%. Nigeria gets up to 90% of its dollar earnings from the sale of crude oil.
“Some of the concerns relate to the risk of the government not meeting its revenue target and the higher deficit that could imply. Speaking to this risk, crude production declined to c.1.67 mbpd in February (vs. 1.74mbpd in January) amidst the material contraction in oil price (down by 14.2% YtD),” Cardinal Stone Partners analysts led by Philip Anegbe, said in April 07 note to clients.
Stocks Selloff
Nigerian Stocks fell 1.23% on Monday as global risk off sentiment hit the local markets. Access Bank fell 9.27%, GTCO -5.62%, Zenith Bank -5.01% as financials felt the brunt of the selloff.
Total foreign transactions on the NGX decreased by 40.36% to N42.65 billion ($28.57 million) in February 2025, from N71.51 billion ($48.38 million) in January 2025.
Bonds
Nigeria’s bonds also extended their losses on Monday, with the $1.25 billion in notes due 2051 plunging as much as 7% to 66.5 cents on the dollar. Yields were up 44 basis points to 12.29% by 3:23 p.m. in London.
Brent crude fell to less than $63 at one point on Monday before recovering somewhat. Nigeria’s budget for this year factored in a $75 oil price.
CBN
CBN’s intervention in the FX market has notably increased, with $321.71 million in FX sales in the last 2 trading sessions ($197.17m on Friday Apr 04 and $124m on Monday Apr 07).
Analysts expect the recent publication of Nigeria’s net FX reserves position ($23.30 billion in 2024 vs $4.00 billion in 2023) to support sentiments.
This position currently amounts to 7.3 months of import cover for goods (compared to 12.0 months based on gross reserves) and 5.0 months for goods and services (versus 8.2 months on gross reserves), both comfortably above the IMF’s benchmark of 3.0 months.
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