Naira Gains Ground to N1,853/£1 as UK Political Turmoil Hits British Pound

The Nigerian Naira has shown renewed strength in the first half of May, recovering from its April lows, while the British Pound has tumbled to monthly lows amid political chaos within the UK’s ruling party.

The pound took a hit after Andy Burnham, a popular Labour Party figure and Mayor of Manchester, challenged Prime Minister Keir Starmer’s leadership raising doubts over the government’s stability and its ability to manage national debt.

According to the Central Bank of Nigeria (CBN), the Naira closed at around N1,853 per pound on Thursday, improving from N1,882.9/£1 on Monday. The currency has largely traded within the N1,825–N1,950 range, influenced by both UK political uncertainty and the CBN’s liquidity management.

Nigeria’s benchmark interest rate remains high at 26.5%, creating a “carry trade” floor that has helped cushion the Naira against sharper falls.

Meanwhile, the CBN continues to narrow the gap between the official NAFEM rate and parallel market rates, a move seen as critical for long-term FX transparency.

With Nigeria’s external reserves stable at about $48 billion, the apex bank has some capacity to intervene against excess volatility. However, strong demand for pounds and dollars from importers and parents paying foreign school fees continues to widen the spread between official and black-market rates.

Encouragingly, Nigerian crude oil has stayed above $100 per barrel in May 2026, supporting the FX outlook though domestic production challenges limit the full benefit.

Pound Slumps on UK Govt Instability The pound fell for a fifth straight day Friday, headed for its worst week since November 2024, trading at $1.3356. Burnham’s hint at running for parliament has fueled speculation of a leadership challenge, adding to pressure on Starmer after heavy Labour losses in local elections.

Gilt investors are especially uneasy, seeing Starmer and Chancellor Rachel Reeves as more committed to fiscal discipline than potential successors. The yield on 30-year gilts is now near 5.7%, far above European peers.

Burnham, who enjoys rare net-positive approval ratings, is seen as a major threat to Starmer’s leadership.

The pound dropped 0.9% to $1.3403 on Thursday its steepest fall since February and also slid sharply against the euro. Meanwhile, the Bank of England held its bank rate at 3.75% but signaled possible hikes, with Governor Andrew Bailey warning of “forceful tightening” if Middle East-driven energy prices stoke inflation.