The Nigerian naira has come under renewed pressure, weakening to a range of ₦2,135–₦2,150 against the British pound sterling, which recently surged to a multi-month high on the back of favorable economic signals and broader geopolitical concerns.
Market participants are treading cautiously ahead of the Bank of England’s (BoE) interest rate announcement on Thursday, a decision widely expected to maintain the current benchmark at 4.25%. The British central bank had previously lowered rates by 25 basis points in May, and has since signaled a slow and deliberate approach to further easing.
UK monetary authorities reiterated that the policy rate corridor of 4.25% to 4.50% would remain in place until they could better assess the domestic impact of evolving inflationary trends and “new policies from U.S. President Donald Trump, still looming large.” Some officials warn that Trump’s economic stance could stoke inflationary pressures and potentially force policy recalibration.
CBN Supports Naira with Forex Injection Amid Oil Gains
The Central Bank of Nigeria (CBN) took a decisive step in May 2025 by injecting $580 million into the foreign exchange market to stabilize the naira and reassure market participants. This intervention aligns with the regulator’s ongoing strategy of direct sales to authorized banks—an approach that has become central in managing short-term volatility.
While the move temporarily calmed market nerves and contributed to a measure of exchange rate stability, experts warn of the long-term risks of relying solely on reserves. They emphasize that sustained stability will depend on “a corresponding increase in dollar inflows.”
Recent improvements in naira performance have been attributed to increased foreign portfolio investment, a result of renewed investor interest in Nigerian assets following key monetary and structural reforms. These changes have also helped narrow the spread between the official and parallel market exchange rates.
Rising Oil Prices Brighten Medium-Term Naira Outlook
Analysts remain optimistic about the medium-term trajectory of the naira. The currency’s undervaluation is seen as temporary, bolstered by increasing oil revenues and enhanced investor confidence in the wake of recent reforms.
A recent rally in global oil prices—sparked by heightened tensions between Israel and Iran—has also provided indirect support for the naira. Crude prices climbed sharply as investors feared potential supply disruptions in the Middle East, a region responsible for approximately one-third of the world’s crude output.
Despite geopolitical uncertainty, the limited regional spillover from the Israel-Iran conflict has led to “some declines in the dollar” as markets adjusted to shifting risk dynamics.
Pound Sterling Rises Against Weakened Dollar
Meanwhile, the British pound sterling has continued its upward momentum, surpassing the 1.36 mark against the U.S. dollar. The appreciation was fuelled by concerns over the Israel-Iran conflict and anticipation of key policy decisions by both the BoE and the U.S. Federal Reserve.
Investors are closely watching UK inflation data, expected on Wednesday, which could significantly influence the pound’s trajectory ahead of the BoE’s policy meeting. Similarly, the Fed’s interest rate decision on Wednesday is expected to affect overall dollar strength and drive further activity in the GBP/USD currency pair.
Earlier expectations of aggressive BoE rate cuts had placed downward pressure on the pound, especially after data showed the UK economy contracted more than forecast in April. However, recent events have bolstered sterling’s resilience.
At the same time, “the Greenback’s safe-haven status is reinforced by escalating geopolitical tensions in the Middle East,” limiting further gains in the GBP/USD exchange rate.
