The naira extended its recent gains in the parallel market, trading below the N1,600/$ threshold amid signs of easing inflation and global weakness in the U.S. dollar.
By midweek, the local currency exchanged at N1,585–N1,590 per dollar in Lagos, Nigeria’s commercial capital, continuing a bullish trend driven by improving economic indicators and higher oil prices.
According to the National Bureau of Statistics, Nigeria’s inflation rate eased to 22.97% in May, down from 23.71% in April—a decline of 0.74 percentage points. Analysts see this as a sign that inflation may have peaked, creating a more favorable environment for the naira.
Economist Bismarck Rewane of Financial Derivatives Company noted that the naira is expected to fluctuate between N1,600/$ and N1,650/$ on the official foreign exchange market through June and July. His outlook is based on data reflecting the Central Bank of Nigeria’s efforts to tighten money supply, which reached a peak in May.
A rebound in global oil prices has also contributed to the naira’s performance, as Nigeria relies heavily on crude oil exports for its foreign exchange earnings.
Meanwhile, escalating tensions in the Middle East have rattled investors. The ongoing conflict between Israel and Iran—driven by Israeli pressure on Tehran to halt its nuclear programme—has injected volatility into global markets.
Reports suggest that the U.S. is increasing its military presence in the region, raising fears of deeper conflict that could disrupt vital oil supply routes. Two oil tankers reportedly collided and caught fire near the Strait of Hormuz, which carries about one-fifth of global seaborne oil shipments. The UK’s Maritime Trade Operations has issued warnings over potential electronic interference affecting navigation systems.
Iran, the third-largest oil producer in OPEC, pumps around 3.3 million barrels per day. Analysts believe that other OPEC members may ramp up production to offset any significant shortfall from Iran.
Despite the turmoil, the U.S. dollar has shown some resilience, gaining about 1% against the euro, Swiss franc, and Japanese yen since last week. However, it remains down more than 8% year-to-date, weighed by investor concerns over U.S. trade policy under President Donald Trump.
Investor focus is now on the U.S. Federal Reserve, which is set to announce its next interest rate decision. Although the Fed is expected to hold rates steady, traders will be closely watching its economic projections and policy outlook.
Slowing U.S. growth, coupled with President Trump’s unpredictable policy moves and rising global oil prices, are complicating the Fed’s policy calculations. A key unemployment claims report is also due later in the day.
Elsewhere, central banks in Switzerland, Norway, and Sweden are expected to make rate announcements that could further influence currency markets.
