As Nigeria battles to stabilize its economy amid challenging global conditions, J.P. Morgan, one of the world’s leading investment banks, has issued a stark warning to investors. The bank is urging investors to exit long positions in Nigerian Open Market Operation (OMO) bills, citing rising macroeconomic risks triggered by declining crude oil prices and renewed global trade tensions—including a tariff push by former U.S. President Donald Trump.
This development comes at a time when Nigeria’s economic managers are striving to maintain market confidence and sustain momentum from ongoing reforms.
Why J.P. Morgan Is Sounding the Alarm
In a research note titled “Frontier Local Markets Strategy: Reducing Risk Further,” dated April 9, 2025, J.P. Morgan highlights the changing global environment that threatens Nigeria’s macroeconomic outlook. The note was seen by Nairametrics, a leading financial publication in Nigeria.
The bank’s major concerns include:
Brent crude oil approaching sub-$60 per barrel, below Nigeria’s estimated fiscal break-even.
Increasing global trade tensions, notably due to Trump’s potential return to power and tariff policies.
Capital flight and weakening demand for Nigerian government securities.
Summary of JP Morgan’s Core Message:
“While Nigeria may well avoid a recession, oil prices below $60/bbl could push the country’s current account into deficit, intensifying pressure on the naira and FX market.”
The Central Bank’s Position and Reassurances
The Central Bank of Nigeria (CBN) recently assured the public of its ability to withstand global economic shocks. It announced:
A net foreign reserve of $23 billion.
A balance of payment surplus of $6.83 billion at the end of 2024.
Plans to boost non-oil FX earnings through enhanced export diversification.
However, JP Morgan’s analysis suggests that these positives may be short-lived if global oil prices continue to fall. The Nigerian economy, heavily reliant on oil exports, is vulnerable to external shocks that affect crude oil demand and pricing.
Nigeria’s Oil Dependence – A Structural Weakness
Despite diversification efforts, oil remains Nigeria’s largest foreign exchange earner. The breakeven point for the Nigerian budget is estimated at $60 per barrel. With Brent crude slipping dangerously close to that level, any sustained dip could lead to:
Widening current account deficits
Depleting FX reserves
Heightened pressure on the naira
J.P. Morgan has warned that if these conditions persist, the USD/NGN exchange rate could surpass ₦1,700/$1, compared to the current average of ₦1,500/$1.
Market Reactions: Capital Flight and FX Pressures
As part of its defensive measures, the CBN injected $550 million into the FX market in March 2025. Nairametrics estimates that interventions this month have exceeded $1 billion, highlighting the scale of pressure the CBN is managing.
Despite this, foreign portfolio investors are reportedly pulling back, with J.P. Morgan estimating potential outflows of up to $10 billion—a figure that underscores the fragility of investor sentiment.