June 12, 2024

This picture taken on January 29, 2016 in Lagos shows 1000 naira banknotes, Nigeria's currency. - Nigeria's central bank governor, Godwin Emefiele, on January 26 dismissed calls to devalue the naira in his monetary policy committee statement. Instead he chose to continue propping up the currency at 197-199 naira to the dollar and maintain foreign-exchange restrictions. As a result, the naira on the black market is hovering around a record low of 305, fuelling complaints from domestic and foreign businesses who can't access dollars required for imports. (Photo by PIUS UTOMI EKPEI / AFP) (Photo by PIUS UTOMI EKPEI/AFP via Getty Images)

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The Naira has lost its four-day winning streak, depreciating by 1.55% to close at 1485.66/$1 on the official market on yesterday, according to the latest data from the FMDQ.

This decline comes after a series of gains in the Nigerian Autonomous Foreign Exchange Market (NAFEM) window. The Naira fell to its lowest level since March 20 when it was N1,492.61/$1.

Over the past week, the Naira had shown a remarkable recovery, gaining ground against the US dollar. The week began with the Naira trading at 1497.33/$1 on Friday, 17th May 2024, marking a 2.45 per cent appreciation.

Forex turnover for that day was relatively low at $83.5 million, representing a significant 69.40% decline compared to the previous trading day.

On Monday, 20th May 2024, the Naira further strengthened to 1468.99/$1, appreciating by 1.93%. Forex turnover saw a notable increase to $161.41 million, a 93.31% rise, signaling renewed confidence in the market.

The upward trend continued on Tuesday, 21st May 2024, with the Naira trading at 1465.68/$1, albeit with a modest gain of 0.23%. The market witnessed a substantial surge in forex turnover, reaching $268.17 million, a 66.14% increase.

On Wednesday, 22nd May 2024, the Naira appreciated slightly by 0.21% to close at 1462.59/$1. However, forex turnover dropped significantly to $123.45 million, a 53.97% decrease, hinting at a potential slowdown in market activities.

Despite these gains, Thursday, 23rd May 2024, marked a reversal of fortunes for the Naira. The currency depreciated by 1.55% to close at 1485.66/$1. Forex turnover for the day was $167.55 million, reflecting a 35.72% increase from the previous day.

The depreciation comes barely two days after the 295th meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN). The CBN increased the monetary policy rate (MPR) by 150 basis points, to a new unprecedented 26.25%.

This is a lower hike compared to the 200 basis points at 24.75% after the previous meeting. The decision announced by the CBN governor, Yemi Cardoso, propels the MPR to its highest point ever, reaffirming the CBN’s aggressive stance on monetary tightening in response to inflationary pressures. The policy rate was raised to curb inflation and attract foreign investment, theoretically supporting the Naira.

Also, the CBN offered a total of N508.98 billion during the Nigerian treasury bill (NTB) auction held on May 22, 2024, with subscription levels significantly surpassing the initial offer, highlighting the continued appetite for fixed-income securities amidst a volatile economic landscape.

Despite the oversubscription of N1.5 trillion, only about N638.98 billion was allotted to the treasury bill investors. The heightened interest in treasury bills can be attributed to the recent increase in the MPR, which has made government securities more attractive to yield-seeking investors.

The increase in forex turnover on Thursday suggests heightened trading activity, possibly driven by speculative actions and adjustments to market positions.

The recent fluctuations in the Naira’s value underscore the volatile nature of the foreign exchange market in Nigeria.

While the central bank’s efforts to stabilize the currency have yielded some positive results, the market remains susceptible to external pressures and domestic economic dynamics.

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