The Naira has emerged as one of Africa’s strongest-performing currencies against the US dollar so far this year, ranking just behind the Zambian Kwacha. While its resilience amid global volatility has been notable, analysts warn that this stability has come at a significant cost.
 
According to Head of Market Research at FXTM, Lukman Otunuga, Nigeria’s foreign exchange reserves have been on a steady decline, falling for 16 consecutive days through April 8 to $48.94 billion — their lowest level since mid-February.
 
He noted that the Central Bank of Nigeria’s commitment to defending the naira in March, amid heightened geopolitical tensions, has contributed to the drawdown.
 
Otunuga described the currency’s stability as “commendable,” but cautioned that “such has come at a heavy cost,” particularly as emerging market assets continue to face pressure from global uncertainties.
 
On the domestic front, attention is firmly fixed on Nigeria’s inflation data for March. Otunuga expects the Consumer Price Index (CPI) to ease to 13.4 per cent year-on-year, down from 15.1per cent recorded in February.
 
He explained that “persistent signs of easing inflationary pressures may encourage the Central Bank of Nigeria to consider rate cuts,” even as other central banks globally lean towards tightening policies to counter conflict-driven inflation.
 
Geopolitical developments remain a key driver of market sentiment. Over the weekend, talks between the United States and Iran ended without resolution after 21 hours of negotiations. Key sticking points included Iran’s nuclear programme and control of the Strait of Hormuz.
 
Otunuga highlighted that fresh tensions escalated after US President Donald Trump threatened to block the Strait of Hormuz, a move that has intensified uncertainty across global markets.
 
“This renewed uncertainty is already being reflected across financial markets, with risk aversion weighing on equities while oil prices surge on rising geopolitical risk premiums,” he said.
 
He warned that market sentiment remains fragile, especially as Iran continues to reject US shipping restrictions and signals potential retaliation targeting Gulf ports. The effective closure of the Strait of Hormuz since late February, he added, raises the risk of both inflationary and growth shocks to the global economy.
 
In the commodities market, oil prices have surged sharply. Brent crude rallied by as much as nine per cent to approximately $104 per barrel, driven by fears of supply disruptions.
 
Otunuga noted that “deepening conflict may keep oil prices elevated, with triple-digit levels potentially becoming the new normal amid extreme supply tightness.”

Gold, however, has shown mixed performance. While prices initially dipped on rising inflation concerns tied to higher oil prices, they later rebounded above $4,700. Despite this recovery, Otunuga pointed out that bearish sentiment persists.
 
“With expectations for lower interest rates in 2026 diminishing and the US dollar strengthening, gold is likely to remain under pressure,” he said, identifying key levels to watch at $4,825, $4,700, and $4,600.
 
Overall, Otunuga stressed that the interplay between inflation data, geopolitical tensions, and commodity price movements will be crucial in shaping market direction in the days ahead.