The Nigerian Naira has experienced a significant upswing, reaching its strongest position against the US dollar since its devaluation earlier this year. Amidst this surge, the Naira has showcased a resilient performance, marking its fourth consecutive week of appreciation and settling at N1,245 per dollar. This positive trajectory has been fueled by mounting confidence in the Nigerian currency, as reported by data from the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The NAFEM data further reveals that the Naira concluded the week at an impressive ₦1,251.05/$1, continuing its upward trajectory against the dollar throughout the month of April 2024. Under the stewardship of Governor Olayemi Cardoso, the Central Bank of Nigeria (CBN) has implemented a series of strategic policies aimed at bolstering local dollar liquidity and shoring up the Naira’s stability.
Despite initial forecasts by the Economist Intelligence Unit (EIU) projecting further depreciation for the Naira, the currency has defied expectations, confounding analysts who anticipated a stabilization around N2,000 per US dollar by year-end. However, prevailing market conditions suggest formidable resistance for the Naira, particularly amidst a strengthening US dollar and robust economic indicators emanating from the United States.
The CBN’s proactive measures, including the clearance of all verified foreign exchange backlogs and a substantial increase in the benchmark interest rate to 24.75 percent, have contributed significantly to the currency’s stability. Moreover, the CBN’s crackdown on unofficial markets and virtual service providers suspected of exacerbating the Naira’s weakness has further bolstered confidence in the currency.
In global financial markets, solid US economic data, notably the better-than-expected nonfarm payrolls report for March, has propelled the dollar index upwards. Consequently, expectations for a Federal Reserve interest rate cut have diminished, with traders now anticipating a 25-basis point cut in June, standing at approximately 51 percent probability.
Looking ahead, Nigeria’s fiscal landscape remains closely tied to oil revenue, with the 2024 federal government budget heavily reliant on this crucial resource. Market observers are eagerly awaiting OPEC’s next assessment, which is expected to provide valuable insights into Nigeria’s oil production. OPEC’s recent report highlighted a decrease in oil production for March, attributed to lower exports from Nigeria and Iraq, along with ongoing voluntary supply constraints.
As the Nigerian Naira continues its upward trajectory, market participants remain vigilant, navigating through evolving global economic dynamics while keeping a keen eye on domestic policies and international developments shaping Nigeria’s economic outlook.
Credit: Nairametrics (Text Excluding Headline)
