The Nigerian naira declined further, falling within the ₦2,135 to ₦2,150 range against the British pound Sterling, which continued its rally amid renewed market confidence. This drop came as the pound soared to a fresh high against the U.S. dollar, driven by investor expectations surrounding key policy decisions in both the United Kingdom and the United States.

Currency traders remained cautious ahead of the Bank of England’s (BoE) monetary policy meeting scheduled for Thursday. Financial analysts widely expect the BoE to maintain its benchmark interest rate at 4.25%, especially after its 25-basis-point rate cut in May. Officials at the British central bank have indicated a slow, measured easing cycle, emphasizing the need to monitor evolving global economic dynamics—especially the potential inflationary impact of new policies from U.S. President Donald Trump.

British Pound Gains as Markets Brace for UK Inflation Data and BoE Policy Signals

As anticipation builds, investors are closely watching the release of UK inflation data, expected on Wednesday, which could influence the pound’s trajectory. Meanwhile, the BoE has reaffirmed its commitment to a 4.25%–4.50% rate corridor, citing the need for further clarity on how U.S. fiscal and trade actions—particularly Trump’s renewed tariff strategies—might affect global inflation and economic growth.

These uncertainties, combined with geopolitical volatility in the Middle East, have significantly impacted currency trends. The British pound Sterling surged past the 1.36 mark against the U.S. dollar, bolstered by its safe-haven appeal and expectations of limited BoE policy changes in the near term.

Naira’s Fragile Position Strengthened by CBN’s Dollar Injection and Investor Inflows

Back home, the Central Bank of Nigeria (CBN) took decisive steps to stabilize the local currency by injecting $580 million into the foreign exchange market in May 2025. This intervention formed part of a broader strategy aimed at restoring market confidence and smoothing short-term exchange rate fluctuations.

By directly selling foreign currency to authorized commercial banks, the CBN has tried to ease pressure on the naira and reduce volatility. Although this approach brought some stability to the exchange rate, experts have warned that such reliance on Nigeria’s external reserves may not be sustainable. Without a corresponding boost in dollar inflows from exports or investments, continuous intervention could strain the country’s reserve position.

Nonetheless, the naira has benefitted from renewed foreign portfolio investment inflows, thanks to the central bank’s proactive stance, improving macroeconomic reforms, and a gradual reduction in global financial pressures. The gap between the official and parallel exchange rates has also narrowed significantly, indicating progress toward achieving a more unified FX rate.

Crude Oil Prices Surge Amid Middle East Tensions, Offering Support for the Naira

Adding to the naira’s potential recovery, the recent surge in global crude oil prices has played a critical role in strengthening Nigeria’s external position. Rising tensions between Iran and Israel have triggered fears of potential disruptions in oil supply from the Middle East—a region responsible for producing nearly one-third of the world’s crude oil. Consequently, oil prices spiked sharply, with energy traders bracing for a possible escalation in hostilities.

The upward trend in oil prices has increased Nigeria’s expected dollar earnings, thereby supporting the naira on the foreign exchange market. Geopolitical risk remains a double-edged sword; while it drives up oil prices, it also prompts flight-to-safety moves into U.S. dollar assets. However, the naira has seen some relief amid this global rebalancing.

Greenback Faces Pressure from Trump’s Trade Policies and Fed’s Upcoming Decision

Meanwhile, the U.S. dollar has come under pressure due to the return of President Trump to the White House and his controversial approach to international trade. A fresh wave of tariffs on U.S. trading partners has sparked concerns over inflation, leading to speculation that the Federal Reserve may adopt a more cautious stance during its interest rate announcement on Wednesday.

These evolving dynamics are expected to influence the GBP/USD currency pair further. If the Fed holds rates steady or signals a dovish tilt, the pound may continue its upward trajectory. However, rising Middle East tensions and the dollar’s status as a global safe haven could cap the pound’s gains in the near term.

Analysts See Medium-Term Strength for the Naira Despite Short-Term Pressures

Despite the naira’s current weakness against the British pound, analysts remain optimistic about its medium-term prospects. Nigeria’s recent monetary policy reforms, coupled with improved fiscal transparency and increased investor participation in the capital markets, have helped boost confidence in the country’s macroeconomic outlook.

Furthermore, the CBN’s active role in the FX market—through interventions and transparent pricing mechanisms—has reduced speculative demand and discouraged arbitrage. With inflation showing early signs of tapering and crude oil earnings climbing, market observers believe the naira may gradually regain its footing in the coming months.

However, sustaining this recovery will require a careful balance between market intervention and structural reforms. Experts stress that Nigeria must boost its non-oil exports, attract long-term foreign investment, and diversify its revenue sources to insulate the economy from external shocks.