OLA OYETAYO is the chief executive officer of Verto, a cross-border payment platform that enables businesses to send money to anyone, anywhere. He tells Business a.m.’s ONOME AMUGE about the impact of recent geographical tensions in the Gulf and how this impacts Nigeria’s currency, bond markets, and economic outlook.
Oyetayo observed that the development has rattled Nigeria’s financial markets, pushing the Nigerian naira from N1,360 to N1,400 within days and lifting 2032 Eurobond yields by 50 basis points, prompting the Central Bank of Nigeria (CBN) to inject $200 million to stabilise the FX market. He warned that the moves have wider implications for inflation, import costs, and Nigeria’s economic recovery, while highlighting growing demand for secure cross-border payment channels as businesses face heightened volatility.
The naira moved from around N1,360 to N1,400 within days in the NAFEM window. What does this tell us about the underlying liquidity and confidence in Nigeria’s FX market?
This NAFEM move was principally driven by the global risk off environment, triggered by the well-documented escalations in the Gulf. Foreign Investors opted to reduce their risk exposure across all emerging markets, not just Nigeria. As such, there should be no cause for concern around the underlying liquidity and confidence in Nigeria’s FX Market as the depreciation and drop in USD liquidity at the time of the move was systemic across the majority of Frontier markets.
The Central Bank of Nigeria injected around $200 million to stabilise the FX market. Do you see this as a short-term firefighting measure or part of a strategy to maintain currency stability?
The Central Bank of Nigeria (CBN) has arguably been guilty in the past for oversupplying liquidity into NAFEM in order to create stability, but ran the risk of giving the impression of an artificially managed market. This largely took place in the immediate aftermath of the 2023 economic regime change in Nigeria. However in recent times, the CBN has been extremely prudent with any form of intervention, with very little USD supplied into NAFEM in 2026 (pre-Gulf escalations). The CBN have managed the transition extremely well over the past 12-24 months to a true willing buyer-willing seller market. However, the tail risk scenario of the Gulf escalations led to an inevitable drop in USD liquidity. The CBN’s actions to intervene have been widely viewed as prudent, not reckless, in order to maintain stability in NAFEM in the wake of a global tail risk.
Given Verto’s role in cross-border payments, what changes are you seeing in transaction volumes or payment patterns since the tensions escalated?
We have seen increasing demand for safe and secure cross-border payments. In volatile environments, businesses still need to ensure their supply chain is safe and that payments go through securely without hidden fees creeping up. Our transaction volumes have, in actual fact, gone up as customers seek a safe way to move their money.
How do you see Nigeria’s macroeconomic outlook evolving if geopolitical tensions remain elevated over the next six to twelve months?
The geopolitical tensions have escalated over the past two weeks but are still yet to reach fever pitch. As such, crude transportation will likely recommence in the Gulf albeit at a much depressed rate. Theoretically, this drop in global supply will be a significant positive for Nigeria’s trade balance, as crude exports become more profitable with Brent prices staying elevated and the backend of the futures curve begins to climb. However there are two caveats. Firstly, this relies on Nigeria’s infrastructure being robust enough to get crude out of the ground for both export and to satisfy the demand from domestic refineries. Furthermore, there will be a knock-on effect to inflation where we’ve already seen Nigeria pump price increases pass through to the wider economy across food and agriculture. On balance, if Nigeria can maintain the downward momentum in Inflation, there should be a strong net positive for the Nigerian economy over the next 6-12 months.
What lessons should policymakers and market participants take from this episode about Nigeria’s exposure to global financial shocks?
Global financial shocks are a tail risk at any given time. If policymakers adjust their strategy for an event that may or may not happen over the long-term, this can delay any much-needed recovery in an economy. Yes, there should always be plans in place in the event that tail risks do rear their heads, but it remains important for those in charge to tackle what is in front of them first and foremost, and execute the best immediate strategy to reach medium-to-long term economic goals. For market participants however, agility is key. There are some asset classes in Nigeria that are more liquid than others, so it’s important to build a diverse portfolio where a large portion of positions can either be de-risked via hedging or liquidation quickly. If investments are stuck in opaque, illiquid asset classes, they will become exposed in high volatility tail risk scenarios, forcing unpalatable exit levels.
