On Thursday, the naira, Nigeria’s money, had mixed results against the dollar.
The dollar, also known as the “greenback,” got stronger. It went up because some people started buying it after it had been low for seven months. But it didn’t go up too much because people think interest rates might be cut.
On Wednesday, the naira got a bit stronger. It was traded at N1,543 for one dollar, better than on Tuesday when it was N1,592 for one dollar, according to the NAFEM market data.
However, in the black market, the naira did not do so well. On Wednesday, it was traded at N1,610 for one dollar, worse than the N1,605 for one dollar on Tuesday. Even though things look better for Nigeria’s economy, the naira is finding it hard to stay close to N1,500 per dollar and is under a lot of pressure this month.
Experts say that if the naira doesn’t hold its current value, it might drop to N1,800 per dollar. Even those who believe in free market economics might think it won’t reach its good levels from March this quarter.
The International Monetary Fund (IMF) has predicted that by 2024, the naira might fall by 35% in value, reaching N2,081 per dollar. But opinions vary. The FDC thinks it will stay around N1,580 per dollar, while the Economist Intelligence Unit (EIU) thinks it will drop to N2,000 per dollar. The Nigerian government has set their 2024 budget based on an exchange rate of N800 per dollar.
The Central Bank of Nigeria (CBN) recently tried to help the naira by giving a lot of dollars directly to companies. They sold about $815 million in one day, but it didn’t help much. The naira’s value didn’t change significantly. This was the biggest single-day intervention under the new CBN Chief, Olayemi Cardoso, and it included various companies, from manufacturers to airlines.
The rapid change in the parallel market rate has worried people. They fear it will make many imported goods more expensive, except for petrol, which seems to be supported by NNPCL. Forex traders blame CBN’s irregular dollar sales for the ongoing stress on the naira. According to Bureau De Change (BDC) operators, “The CBN doesn’t sell dollars regularly enough,” which causes people to lose faith in the currency market and puts pressure on the parallel market.
Dollar Gets Stronger from Low Levels
The dollar index went up by 20 points in London trade, after falling for three days and reaching a seven-month low. With more bets on a rate cut in September, the dollar might face pressure again. Minutes from the Federal Reserve’s meeting in late July showed that many policymakers support lower rates. The U.S. dollar had a little boost from higher Treasury bond yields, but big gains seem unlikely due to the Fed’s predictions.
The U.S. Bureau of Labor Statistics’ review showed that U.S. employers added 818,000 fewer jobs than reported between March 2023 and March 2024. This means the job market isn’t as strong as thought, which might lead to more rate cuts by the Fed. Even though some policymakers wanted immediate action, many supported a rate cut in September, according to the Fed’s meeting minutes from July 30-31.
Global investors reacted fast, changing their predictions for a 50-point rate cut in September from 29% to 38%. They also think the Fed will reduce rates by 100 points by the end of the year, keeping U.S. bond yields low. Lower U.S. interest rates were supported by payroll data for the year ending in March 2024. The revised data also raised concerns about a slowing job market and a possible U.S. recession, especially with the recent weak payroll data.