The Naira has fallen to its lowest since April, even though the US dollar isn’t very strong right now.
Right now, the dollar is at about 104 points compared to other world currencies. People are waiting to see what the US Federal Reserve will decide about interest rates.
The Nigerian Naira has been going down for five days straight. The Central Bank of Nigeria (CBN) is trying to keep things steady.
The Naira is now trading at N1,644 for one US dollar. This is happening because people are waiting for news about US inflation and interest rates.
The Naira’s drop in value is mainly because more people want dollars to pay for imports, foreign school fees, and summer vacations by wealthy Nigerians.
Looking at the numbers, we see that Naira can’t stay strong at N1,600 per dollar. The CBN’s foreign exchange reserves are not helping much. If the Naira goes below this point, it might drop to its low from February 24. The Naira’s value also fell in the Nigerian Autonomous Foreign Exchange Market (NAFEX) yesterday.
According to FMDQ data, the Naira dropped by N9.72 against the US dollar, trading at N1,621.12 per dollar, down from N1,611.40 per dollar the day before.
The CBN, through its acting director Hakama Sidi Ali, said that the bank is trying hard to keep the foreign exchange market steady.
Businesses are also feeling the pinch from the Naira’s fast changes. MTN Nigeria’s CEO, Karl Toriola, said that because the Naira lost value, they had much bigger foreign exchange losses.
Focus on US Interest Rates
Everyone is really interested in what will happen with US interest rates. After a meeting on Wednesday, the US Federal Reserve is expected to talk about the economy. It looks like they might cut interest rates in September.
The Federal Open Market Committee (FOMC) might say that rate cuts are coming, but they might not confirm a September cut just yet.
Recent data from the US Commerce Department showed that inflation is still at 2.6% in June, which is the Fed’s favorite measure. In June, core PCE prices rose by 0.2%, more than the 0.1% rise in May.
Moody’s Analytics thinks there will be two cuts of 25 basis points in interest rates: one in September and one in December. Fitch Ratings also thinks the Fed will lower rates twice this year.
They said, “The latest US inflation and job market data make us think two cuts are likely in the second half of 2024.”
But there’s also talk that more political and global uncertainty could hurt the economy.
This means the Bank of England might also cut interest rates by 25 basis points on August 1. Even though the UK’s inflation is stable at 2%, wages are still high.
After the UK showed a big public budget deficit, the pound stayed steady at 1.2866 USD against the US dollar. Some experts think the Bank of Japan might raise its key rate again soon.