Naira Strengthens Amid Falling Inflation Outlook, Global Risks Loom

The naira, has sustained its positive run against the United States dollar in the first quarter of 2026, even as analysts project a further easing in inflationary pressures that could shape monetary policy direction in the coming months.
Data shows that the naira, which opened the year at N1,431/$ on January 1, appreciated to N1,355/$ as of April 10, reflecting a steady gain amid heightened global uncertainties.
Commenting on the development, Head of Market Research at FXTM, Lukman Otunuga, said the naira is currently the second best performing African currency against the dollar year-to-date, trailing only the Zambian kwacha.
He, however, noted that the currency’s resilience has come at a cost, pointing out that Nigeria’s foreign exchange reserves have declined for 16 consecutive days through April 8, dropping to $48.94 billion, the lowest level since mid-February.
Otunuga explained that the Central Bank of Nigeria (CBN) had remained committed to defending the local currency in March, especially as rising geopolitical tensions triggered volatility across emerging market assets.
On the domestic front, he stated that attention is now focused on the country’s inflation data for March, with expectations that the Consumer Price Index (CPI) may ease to 13.4 per cent year-on-year, down from 15.1 per cent recorded in February.
According to him, persistent signs of moderating inflationary pressures could open the door for the apex bank to consider cutting interest rates, particularly at a time when other central banks are leaning towards tightening in response to global inflation risks.
The global environment, however, remains uncertain. Over the weekend, peace talks between the United States and Iran ended without resolution after 21 hours of negotiations, with disagreements lingering over Tehran’s nuclear programme and control of the Strait of Hormuz.
The situation escalated further after former US President Donald Trump threatened to block the strategic waterway, heightening tensions and rattling global markets.
As a result, investor sentiment weakened, with equities coming under pressure while oil prices surged sharply on fears of supply disruptions. Brent crude climbed by as much as nine per cent to about $104 per barrel, underscoring growing concerns over a potential supply shock.
Otunuga warned that the Strait of Hormuz, which has effectively remained closed since late February, poses significant risks to global growth and inflation, with the potential to keep oil prices elevated in the near term.
He added that the fragile geopolitical backdrop leaves markets highly sensitive, with developments in the Middle East expected to continue influencing currency movements, commodity prices and broader financial stability.