On Friday, the naira traded at N1,678/$ on the official market, down from N1,639/$ on Thursday, marking a steep decline. Since the Central Bank of Nigeria’s (CBN) exchange rate adjustment in June 2023, the naira has lost over 70 per cent of its value against the dollar, a move originally intended to attract foreign investors.
Companies with dollar-denominated debts, such as Nigerian Breweries and Nestlé Nigeria, have faced mounting liabilities due to the naira’s devaluation, underscoring the challenges for businesses operating in Nigeria.
The CBN’s recent survey indicates Nigerian businesses expect further depreciation through the end of the year, with potential recovery anticipated in 2025. President Tinubu’s administration launched reforms to stabilize the naira and boost investor confidence by modernizing the currency valuation system.
However, Trump’s “America First” agenda, prioritizing U.S. energy independence, could lower global oil prices, reducing Nigeria’s oil revenue and intensifying pressure on the naira. Analysts forecast that Trump’s trade policies may bolster the dollar, possibly pushing the naira beyond N2000/$ in 2025.
While Trump’s administration may reduce U.S. development aid, expansion of initiatives like “Prosper Africa” could potentially improve liquidity in Nigeria’s foreign exchange market.
On Friday, despite recent U.S. Federal Reserve interest rate cuts, the dollar gained strength. The Federal Reserve cut rates to 4.75 per cent in October, following a half-point reduction in September, leaving the door open for a potential December cut based on economic growth.
Trump’s return may also increase U.S. fiscal spending. He has expressed intentions to extend the Tax Cuts and Jobs Act of 2017, which expires in 2025, adding further upward pressure on Treasury yields and reinforcing the dollar’s strength.
