Nigeria’s financial markets are under pressure as global shocks triggered by new tariff threats from Donald Trump send ripples through emerging markets. On Monday morning, local bond and currency markets opened to intense volatility, following a cascade of red across global financial markets.
In what appears to be a coordinated effort to manage rising demand pressure in the FX market, the Central Bank of Nigeria (CBN) sold a hefty $124 million at exchange rates ranging between N1,595 and N1,611 per dollar, before 10am.
This follows a separate $197 million intervention on Friday, previously reported by Nairametrics, signaling a more aggressive stance by the apex bank to steady the naira.
Despite these efforts, the naira remained under significant pressure as buyers in the market pushed rates even higher. The sharp spike in demand and thin liquidity levels point to growing uncertainty in the foreign exchange market, likely exacerbated by both local and international developments.
Bond market meltdown
In the sovereign debt space, Nigeria’s Eurobond prices plunged by as much as $5 on Monday, with yields spiking to 12%, indicating a steep rise in the cost of borrowing.
- The selloff, which began late last week, intensified as trading opened globally, with investors dumping riskier assets amid fears of a renewed global trade war.
- The price declines were widespread across different maturities, underscoring a deepening loss of confidence, not necessarily tied to any fundamental deterioration in Nigeria’s economic position, but rather to broader market risk aversion.
Fixed-income analysts suggest the market rout could complicate Nigeria’s access to international debt markets in the near term, especially as the federal government continues to explore dollar-denominated instruments to finance its fiscal gap.
Global carnage sparked by Trump tariffs
The catalyst for the latest selloff appears to be fresh fears over protectionist U.S. trade policy.
Global markets were rocked by Donald Trump’s announcement last week of sweeping tariffs, including a proposed 10% across-the-board levy on all imports, and targeted duties on Chinese and Mexican goods.
- Markets across the world reacted violently. According to the Financial Times, contracts tracking the S&P 500 were down 3.1%, while Nasdaq futures dropped 3.4%.
- Asian markets took a harder beating, with Hong Kong’s Hang Seng Index plunging over 13%, its worst single-day decline this century.
- In Europe, stocks also cratered. The Stoxx Europe 600 index fell 5.7%, Germany’s DAX was down 6.4%, and the FTSE 100 slipped 5.1%—a sweeping global correction not seen since the early days of the pandemic.
- The speed and scale of the sell-off reflects deep investor anxiety about what a return to Trump-era tariffs could mean for global trade flows, inflationary pressures, and central bank policy.
Fears are rising that the global economy could be thrown into disarray, with emerging markets like Nigeria caught in the crossfire.
A test for Nigeria’s policymakers
The central bank’s dual interventions—nearly $321 million in three trading days—suggest that authorities are not only trying to plug liquidity gaps but also pre-empt market panic.
- Yet, with global forces now at play, the CBN may need to do more than just intervene; it may need to clearly communicate a sustained FX strategy to reassure both domestic and foreign participants.
- On the fiscal side, rising yields on Eurobonds could derail Nigeria’s near-term financing plans.
- Higher debt service costs could also strain the government’s fiscal framework, especially in a year when it is counting on external borrowing to support its budget and infrastructure goals.
