Nigeria’s financial markets opened the week on shaky ground as global trade tensions, stoked by fresh tariff threats from former U.S. President Donald Trump, triggered widespread volatility across emerging markets. The ripple effects hit the naira and Nigeria’s Eurobonds hard on Monday, with local traders reacting sharply to global economic tremors.
In a determined bid to tame volatility in the foreign exchange market, the Central Bank of Nigeria (CBN) sold $124 million in the early hours of Monday, offering rates between N1,595 and N1,611 per dollar. This came swiftly on the heels of a $197 million intervention last Friday, previously reported by 9am News, bringing total interventions to $321 million in just three trading sessions.
Despite these efforts, the naira continues to weaken. Liquidity constraints and escalating demand have pushed market participants to price dollars higher, underscoring the fragility of the current FX framework.
CBN’s aggressive posture is being viewed as a short-term measure to calm frayed nerves. However, analysts warn that without a cohesive and transparent long-term strategy, these interventions may offer only temporary relief.
Bond Market Suffers Global Fallout
The bond markets were not spared. Nigeria’s Eurobond prices plunged by up to $5, with yields jumping to 12%, reflecting investor flight from risk. The sell-off, which began last week, escalated dramatically on Monday following signs of a full-blown risk-off sentiment globally.
Importantly, the bond rout is not being driven by deteriorating Nigerian fundamentals but rather by a broader global aversion to emerging market debt. Still, the consequences could be dire: Nigeria’s access to the international debt market may now face higher barriers, potentially complicating its efforts to raise much-needed dollar funding for its 2025 budget and infrastructure plans.
The market carnage traces back to Donald Trump’s recent announcement proposing a 10% tariff on all U.S. imports, with steeper levies aimed at China and Mexico. The move has reignited fears of a protectionist resurgence, similar to what marked his first term.
Global markets responded violently:
- S&P 500 futures dropped 3.1%
- Nasdaq futures plummeted 3.4%
- Hong Kong’s Hang Seng Index fell a record 13% in one day
- Europe’s Stoxx 600, DAX, and FTSE 100 tumbled by 5.7%, 6.4%, and 5.1% respectively
The sheer speed and breadth of the sell-off underscore investor anxiety over renewed trade wars, inflation, and the potential tightening of global liquidity with developing economies like Nigeria caught in the middle.
The CBN’s recent interventions show a willingness to act quickly, but observers believe more will be required in the coming days. Clear guidance, not just liquidity, may be key to calming both investor sentiment and domestic expectations.
On the fiscal side, rising borrowing costs could further strain Nigeria’s debt service obligations, especially given the country’s increasing reliance on external financing. Any delay or disruption in access to international capital could derail budget execution and slow key capital projects.
The days ahead will test the resolve of both monetary and fiscal authorities. With Trump’s tariffs rewriting global trade dynamics, and capital flows becoming increasingly risk-sensitive, Nigeria must brace for prolonged uncertainty in both currency and debt markets.
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