The Nigerian naira got a little stronger at the end of the week, going below N1600. This happened while the dollar changed a lot in global markets.
In the NAFEX market, the naira went up by 0.01%. It moved from N1,589.61/$ to N1,589.5/$. This small gain happened even though the Central Bank of Nigeria (CBN) is trying hard to keep the market steady.
The naira is still close to its low point in four months. The CBN is doing many things to control the exchange rate and make sure there is enough money.
The value of the dollar is changing a lot, making currencies around the world, including the naira, go up and down. When the U.S. dollar changes, it impacts other currencies too.
CBN’s Efforts to Keep Nigerian Market Steady
Even though the CBN is trying hard to keep the market steady by increasing interest rates for the 12th time, the naira is still near its four-month low. On Tuesday, the CBN raised interest rates by 50 basis points to 26.75% and has sold lots of dollars to make sure there is enough foreign exchange (FX).
Recently, the CBN gave $148 million to 29 dealers to stabilize the market after the naira fell. This was done on Monday, July 22, and Tuesday, July 23, 2024, with exchange rates between N1,470.00/$1 and N1,510.00/$1.
Two weeks before, the CBN sold $122.67 million to 46 dealers to reduce market ups and downs. The CBN also made borrowing more expensive for banks and lowered their deposit returns to manage naira liquidity.
Additionally, to attract naira investments, the CBN offered a high yield of 22.1% on Treasury Bills. But the main problem is still the lack of foreign exchange. The CBN said this is because rich Nigerians need dollars for school and vacations abroad.
Dollar Changes Affect Global Market
This week, the U.S. dollar index has been moving between 104.00 and 104.50. The Japanese Yen has become the best-performing currency this month. The U.S. dollar’s change is due to events related to the Japanese Yen and expectations of a rate hike by the Bank of Japan on July 31.
Rumors that the U.S. Federal Reserve might lower interest rates in September have also affected the dollar’s value. It seems the Fed won’t change rates during its July 31 meeting.
The dollar is also influenced by the U.S. political scene, including Biden pulling out and Trump facing an assassination attempt. The U.S. presidential campaigns have different views on keeping the currency value.
Trump and his running mate, JD Vance, think a weak dollar might help U.S. exports and stabilize the currency. The public is aware of this view now.
The Fed is expected to keep rates steady next week, but people will watch for any changes in their plans. The Fed’s latest projection shows one rate drop likely in December.
The CME Group’s FedWatch Tool shows a 98% chance of lower rates by the end of the year and a 99% chance of a rate cut in the September 18 meeting.