See Exchange Rate Tonight As Naira Appreciates Against Dollar

Naira posted impressive gains against dollar amid higher CBN inflows, recording its best gains since March.

The central bank is also set to raise key interest rates one last time to support the naira and curb inflation, which is near a three-decade high, before ending its aggressive tightening drive.

Data from FMDQ revealed that the naira gained nearly N100/$ as the local currency traded at N1,500.32, representing a whopping 640 basis points higher than the N1,596.92/$ quoted last Friday.

On the black market, a popular medium for forex trading among the population, the local currency stood at N1,570 per dollar, gaining less than 100 basis points compared to N1,580 on Friday.

See Exchange Rate Tonight As Naira Appreciates Against Dollar

The CBN sold approximately $106.5 million to registered foreign exchange dealers over two days late last week to support the country’s ailing foreign exchange market.

Nigeria’s apex bank says the main drivers of the latest fluctuations in the foreign exchange market are increased demand from business organisations and the expected seasonal surge in summer.

Nigeria’s Monetary Policy Committee meeting is likely to result in a small rate hike due to the country’s high inflation. High price performance on the black market suggests that the naira will continue to face resistance near the 1,600 per dollar resistance line.

The Monetary Policy Committee (MPC) of the CBN raised the monetary policy rate (MPR) from 24.75% to 26.25%, an increase of 150 basis points, during its most recent meeting on May 21, 2024.

Previous MPC sessions in 2024 resulted in three rate hikes, which helped the country’s foreign portfolio investments (FPI) to increase but fell short of the inflation-reducing target.

The market has already priced in the possibility that the high inflation rate will lead to a fourth increase in the Monetary Policy Rate (MPR) this year.

The MPC members’ decision to adopt a conventional approach to reduce inflationary pressure by using the interest rate as an instrument has largely influenced their decision to maintain their hawkish stance, but Nigeria’s inflation has failed to be contained.

Since the MPC’s last decision on the minimum interest rate in May 2024, inflation has increased by 0.24% to 34.19% in June 2024.

Nigeria’s annual inflation rate has remained high despite some measures taken by the Central Bank of Nigeria (CBN) to reduce the consumer price index, which has been high for 28 years.

As a result of the June inflation rate increasing from 33.95% in May 2024 to 34.19%, the Monetary Policy Committee (MPC) of the CBN is expected to hike interest rates on Tuesday.

According to Goldman Sachs Group Inc. economist Andrew Matheny, “Since the last meeting, developments have been hawkish; inflation has not slowed at all.

Above all, the value of the naira has fallen again, and it is certainly inflationary. All of this suggests that the CBN will continue to adopt a hawkish stance.”

Many households are now below the poverty line due to the continued fall in the value of the naira, the 18th consecutive month of price increases, and a decline in purchasing power.

World Bank data revealed that the oil-rich West African nation has the second-highest poverty rate after India, with about 87 million people living below the poverty line.

To curb inflation and change the perception of foreign investors, Goldman urges the central bank to do “something much bigger, much bolder, much more decisive.”

According to Matheny, “50 or 100 additional basis points is not going to make a difference in the eyes of an investor.”

Since February, the Brazilian central bank, led by Cardoso, has raised interest rates by a total of 750 basis points to 26.25%. Synonyms and definitions