Market News

The Nigerian naira gained about 1.2% against the U.S. dollar over the past week, moving from N1,519/$ to N1,497/$.

This comes as the Central Bank of Nigeria (CBN) holds a two-day meeting to decide on interest rates, with the outcome expected on September 23. The biggest daily gain happened on September 19, when the exchange rate dropped by 0.66%.

Markets expect the CBN may cut interest rates, supported by a stronger naira and lower inflation. Inflation fell for the fifth month in a row to 20.1% in August, helped by currency stability and higher foreign reserves.

At the official market, the naira is testing resistance levels of N1,519–N1,524/$ and support levels of N1,476–N1,485/$. On the black market, it is trading between N1,515 and N1,517/$.

The rise is linked to stronger foreign reserves, more oil and gas revenue, reduced oil theft, and reforms by the CBN that have discouraged speculation.

Analysts suggest the Monetary Policy Committee (MPC) could lower its benchmark rate from 27% to 25%. A narrower policy rate corridor may also be introduced to better control liquidity. The naira is also benefiting from global factors.

The U.S. Dollar Index (DXY), which measures the dollar against other major currencies, has fallen 10% this year. A weaker dollar often supports emerging market currencies like the naira.

In addition, Nigeria’s $2 billion currency swap deal with China is reducing the demand for dollars in the $22 billion annual trade between both countries. This move allows more payments to be made in naira, easing foreign exchange pressure by up to $20 billion.

Import demand is also falling due to government export-promotion efforts and changing consumer behavior, such as reduced luxury imports.

Meanwhile, the U.S. Federal Reserve recently cut its interest rate by 25 basis points to 4%, its first cut of the year. Fed Chair Jerome Powell said the decision was a “risk management cut” to support a weakening labor market despite high inflation.

Some Fed officials, including Governor Stephen Miran, had pushed for a deeper 50 basis point cut. His upcoming speech could influence global markets, including the naira.