The war between the United States and Iran began in late February, triggering a conflict that quickly rattled global energy and financial markets as well as the closure of the Strait of Hormuz – the world’s most important oil chokepoint. Nigeria, like many other countries not involved in the conflict, was still affected, with the impact initially showing up as a shift in foreign portfolio investment sentiment and pressure building on the naira.
The real question is how Nigeria’s currency fluctuations will affect businesses in the long term and what it would take for the country to emerge stronger from any potential shocks in the future. In the early days of the war, the Central Bank of Nigeria (CBN) reacted quickly to mitigate the effects on the foreign exchange market. Within 48 hours, it injected $200 million to defend the naira, followed by a further $1.1 billion in reserves in the weeks that followed.
These measures helped the naira remain largely stable through the worst of the volatility and were especially effective given that Nigeria had already been rebuilding its economic credibility for about 18 months before the war erupted. The CBN had cleared a verified $7 billion FX backlog that had previously paralysed manufacturing and trade for years and raised interest rates to bring inflation under control. Over the same period, portfolio inflows also began to return, and reserves climbed to a 17-year high, giving the CBN room to respond from a position of strength rather than scarcity. Even as the naira weakened, Nigerian stocks did the opposite, with the benchmark index crossing 200,000 points for the first time in its history, a sign that equity investors were betting on Nigeria’s longer-term story.
