The Nigerian naira strengthened to N750.14 in the official window on Monday, breaking the previous week’s pattern and establishing a fresh price action for the day. Information from the foreign exchange market revealed that carryover from the recorded forex demand has always resulted in a negative exchange rate at the start of the week.
Unfortunately, when the apex bank policy committee intimated that it would not be convening a meeting in November 2023, the currency rate on the illicit market deteriorated. The Naira strengthened in the official market by 5.26%, ending at N750.14 to the US dollar, compared to the previous rate of N791.75, according to data from the FMDQ OTC FX platform.
The markets realized in 2023 that the Nigerian naira may suffer significant harm from a limited supply of foreign exchange in the face of mounting shocks. Moreover, speculators may just need a local currency devaluation to obtain a greater foreign exchange spread.
The harm caused by the local currency’s decline in value has kept the pressure on inflation alive. The Central Bank suffered losses as a result, both in terms of managing currency and preserving price stability.
Every attempt at policy has been a zero-sum game. The necessity for a reform of industrial strategy for Africa’s largest economy is shown by the fact that the FX inflow problem has continued in the absence of decisive policy actions.
This also emphasises the fact that no economic agent can control the demand and supply side at the same time. The Nigerian government has been controlling borrowing rates, offering negative interest yield on assets.
On their part, foreign investors who usually flock to the economy have kept their funds away despite multi-faceted economic reforms – which are still ongoing. In the parallel market, the Naira depreciated by 0.26% to close at N1,138 per US dollar amidst a fresh rally in the commodities market.
ICE Brent crude advanced by 1.97% to $82.2 per barrel, while the West Texas Intermediate (WTI) crude oil also increased by 1.79% to $77.4 per barrel. Nigeria US Dollar Bond Yield Climbs as FPIs Dump Assets
The Central Bank of Nigeria has again postponed its monetary policy committee, a report by Bloomberg on Monday which quoted the CBN’s Director of Corporate Communications, Dr Isa Abdulmumin, said, “MPC is not holding” a meeting this week in a text message response.
