The Central Bank of Nigeria (CBN) raises interest rates, boosting the naira in the official market while leaving its black-market performance unchanged.
According to FMDQ data, the naira strengthens to N1,659.44/$ in the official market on Tuesday, up from N1,675.62/$ on Monday. In the black market, however, the currency remains steady at N1,750/$ on Wednesday morning across major cities.
CBN Tightens Monetary Policy to Stabilize the Naira
The CBN increases the Monetary Policy Rate (MPR) by 25 basis points, bringing it to 27.50% from 27.25%. Other key parameters, including the Cash Reserve Ratio (CRR) at 50% and the Liquidity Ratio at 30%, remain unchanged.
CBN Governor Yemi Cardoso emphasizes the bank’s commitment to ensuring currency stability and fostering a supportive environment for economic growth. “The Nigerian Central Bank exists to maintain stability, which is essential for economic planning,” he says, highlighting the bank’s use of regulatory tools to address market misconduct and promote discipline.
Cardoso notes that, despite inflationary pressures and global uncertainties, the naira has maintained relative stability since June 2024, signaling resilience amid challenges.
CBN Introduces Bloomberg BMatch Platform for FX Trading
To enhance transparency in foreign exchange trading, the CBN directs authorized dealers to adopt the Bloomberg BMatch platform by December 2, 2024. This electronic foreign exchange matching system (EFEMS) automates FX transactions, improving governance, price discovery, and operational efficiency.
The CBN explains that the platform reduces volatility and increases market liquidity, offering a more transparent and efficient trading environment.
Trump’s Tariff Plan Shakes Global Currency Markets
Globally, the naira faces pressure following former U.S. President Donald Trump’s announcement of higher tariffs. Trump declares plans to impose a 25% tariff on Canadian and Mexican imports, along with a 10% increase on existing tariffs for Chinese goods.
The U.S. Dollar Index, which measures the dollar’s strength against major currencies, hovers around 106/107 points during Wednesday’s trading. Strong U.S. economic data and a firm Federal Reserve stance strengthen the dollar, creating ripple effects in emerging markets.
Analysts predict the Federal Reserve will begin easing interest rates in December, with gradual cuts throughout 2025. Despite this outlook, inflation concerns and geopolitical tensions continue to impact global currency movements.
Outlook
The CBN’s monetary measures and adoption of advanced trading platforms aim to stabilize the naira. However, external factors such as global economic trends and U.S. monetary policies remain key influences on the currency’s performance.
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