The Nigerian currency, called the naira, had a tough end last month. On Monday, September 30, 2024, it was trading at N1,541.94 for $1. But during the whole month, it showed some strength.
At the beginning of the month, the naira was trading at N1,585.77 for $1 in the official market. By the end of the month, it had made a small gain of 2.85%. However, it didn’t do well in the black market.
In the unofficial market, also known as the black market, the naira traded at N1,700 for $1. The day before, it was N1,705 for $1. So, it stayed almost the same.
People who sell money in these unofficial markets noticed there was less money available in the past two weeks. This could have caused the naira to drop in value.
Last year, President Bola Tinubu removed some rules that kept the naira’s value artificially high. This was done to bring in more foreign investment. Since then, the naira has lost more than two-thirds of its value against the dollar.
Experts in Nigerian businesses believe the naira will get weaker until December. However, they think it will get stronger next year. This contradicts other financial predictions from major companies that said the naira should stay around N1,000 or less.
A big chunk of Nigeria’s foreign money, about 40%, is used to buy petroleum products. Dangote, a large company, said their refinery will help make the naira stronger. Starting October 1st, the biggest refinery in Africa will start accepting naira as payment for crude oil. The Federal Inland Revenue Service (FIRS) Chairman, through his spokesperson, confirmed this deal will start on Tuesday.
A team led by Zacch Adedeji is making sure this naira payment deal happens smoothly. Adedeji’s team is working very hard to make sure everything is done right. According to his spokesperson, Adedeji knows how important it is for this to benefit the Nigerian people exactly as planned.
In positive news, the amount of money traded in the NAFEM market increased a lot. In the first nine months of 2023, the turnover was $20.9 billion. In the same period in 2024, it went up to $33.7 billion, a big 61% increase.
U.S. Dollar Strong Due to Solid U.S. Economy
The U.S. dollar stayed strong against other major currencies during the London trading session on Tuesday. This happened after Federal Reserve Chair Jerome Powell hinted there might not be big interest rate cuts soon.
The dollar index, which measures the value of the U.S. dollar against other currencies, went up by 10 points on Tuesday to reach 100.82. It had already risen by 30 points on Monday. Powell, speaking at a conference in Tennessee, mentioned that the central bank might continue to lower interest rates by only a quarter point at a time. He said, “It doesn’t seem like this committee is in a rush to lower rates.”
After his speech, traders thought there was a 35.4% chance of a 50-point cut, compared to a 53.3% chance the day before. However, they still believe the Federal Reserve will cut rates again at their next meeting in November, according to a tool from CME Group.
The Federal Reserve started lowering rates in August with a larger half-point cut. Powell’s comments came before a busy week for U.S. economic reports. These include the Institute for Supply Management’s report on Tuesday, a non-manufacturing report on Thursday, and key jobs numbers on Friday.