The Nigerian naira has rallied sharply against the U.S. dollar in the first half of May, breaking below the N1,400 per dollar threshold and testing support around the N1,350 level. Analysts say the currency could firm further toward the N1,320 mark if the current bullish momentum among NGN traders endures.
Recent data points to a surge in foreign exchange inflows from overseas investors, exporters and oil firms. Market observers attribute the uptick to the attractive yields offered by Nigeria’s sovereign debt, which have drawn fresh capital and bolstered the pool of naira‑denominated funds. While a gap still exists between the official exchange rate and the parallel “street” market, the disparity is narrowing: the unofficial rate stood at roughly N1,404 per dollar, compared with an official rate of N1,356. The convergence is being read as a positive sign that the two markets are moving closer together.
Against this backdrop, the U.S. Dollar Index (DXY) – which measures the greenback against six major currencies – hovered around 98.1 during the London session, maintaining modest upward pressure after posting losses on Friday. The dollar’s resilience is being reinforced by heightened risk aversion stemming from the stalled peace process in the Middle East. Recent statements from the United States and Iran have underscored the deadlock. President Donald Trump dismissed Iran’s latest peace proposal as “totally unacceptable,” while Iranian officials reiterated their demand for an end to hostilities on all fronts, the removal of sanctions and recognition of Tehran’s control over the Strait of Hormuz.
The impasse has kept the strategic waterway largely shut since the conflict escalated in late February, disrupting a chokepoint that normally handles about 20 % of global oil and gas shipments. The uncertainty has bolstered demand for the dollar as a safe‑haven asset. In Asian trading on Monday, the greenback rose 0.3 % against the Japanese yen, reaching 157.10 yen, while the euro slipped 0.28 % to $1.1754.
The combined effect of a strengthening dollar and the narrowing naira spread highlights the inter‑linked nature of global risk sentiment and Nigeria’s foreign exchange dynamics. Should the nascent inflows persist and geopolitical tensions ease, the naira may consolidate its gains. Conversely, any escalation in the Middle East could revive safe‑haven flows into the dollar, exerting downward pressure on the naira and testing the resilience of the newly‑formed support zones. Stakeholders will be watching both the domestic policy response and international developments closely as the market seeks a new equilibrium.
