CBN Unveils New Dollar Rate as Naira Begins Week Firm as USD, Other Currencies
- Naira began the week strongly against the US dollar as increased forex activity supports a modest weekly gain
- CBN cuts benchmark interest rate from 26.5% to 23%, raising questions about naira asset demand
- Official forex turnover rises 8.9% to $2.25 billion, with Wednesday recording the week’s strongest trading activity
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Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
The naira heads into the new trading week with a modest gain against the dollar, after closing Friday at ₦1,329.51/$ amid increased activity in Nigeria’s official foreign exchange market.
The closing rate represented an improvement of ₦1.69 from the ₦1,331.20 opening benchmark reported for the week. However, the currency surrendered part of its earlier gains over three consecutive sessions, showing that its recovery remained limited.
Source: Getty Images
The performance coincided with the Central Bank of Nigeria’s decision to reduce its benchmark interest rate, a move that had raised questions about the likely effect on demand for naira assets.
CBN cuts interest rate to 23%
The CBN’s Monetary Policy Committee reduced the Monetary Policy Rate by 350 basis points, from 26.5 per cent to 23 per cent, on Tuesday, September 22.
Speaking after the meeting in Abuja, CBN Governor Olayemi Cardoso explained that the adjustment sought to bring the policy rate closer to prevailing market rates and improve the effectiveness of monetary policy, a Premium Times report stated.
Lower interest rates can reduce the attraction of local currency investments by lowering potential returns. However, the naira’s immediate response showed that the announcement did not trigger a sharp depreciation during the trading sessions covered.
Forex turnover reaches $2.25 billion
Trading activity strengthened in the Nigerian Foreign Exchange Market, with turnover reaching approximately $2.25 billion between Monday and Thursday.
That compared with $2.07 billion over the corresponding four days of the preceding week, representing a reported increase of 8.9 per cent.
The number of transactions also rose from 1,183 to 1,351, an increase of 168 deals, or 14.2 per cent. The comparison covers matching four-day periods, rather than two complete trading weeks, Leadership reported.
Turnover measures the value of transactions completed in the market. Higher turnover indicates increased trading activity, although it does not, on its own, establish that foreign investment inflows increased.
Wednesday records strongest trading activity
Wednesday delivered the highest turnover within the Monday-to-Thursday period, with transactions worth $732.45 million completed across 389 deals.
This exceeded Tuesday’s $694.58 million from 367 deals. On Monday, before the policy announcement, turnover stood at $335.51 million across 290 transactions.
Wednesday’s turnover was therefore more than twice Monday’s level, highlighting the increased activity around the policy decision.
The timing does not establish that the rate cut alone caused the increase, since trading volumes also reflect other market conditions.
Naira retains only part of its gains
The naira closed Monday at ₦1,329.80 per dollar before strengthening by ₦2.02 to ₦1,327.78 on Tuesday.
It subsequently weakened to ₦1,328.50 on Wednesday and ₦1,328.67 on Thursday, before ending Friday at ₦1,329.51.
Source: Getty Images
Despite those successive declines, the currency finished stronger than the reported opening benchmark, leaving it with a small overall improvement.
For businesses budgeting for dollar payments, the closing rate provides a reference point, although actual transaction costs depend on the applicable rate and charges.
As trading resumes, the key question is whether stronger market activity will accompany sustained currency stability, after a week in which the naira held its ground but struggled to retain its strongest gains.
Naira stages strong comeback against dollar
Legit.ng earlier reported that the Nigerian naira returned to positive territory on Monday, September 21, strengthening against the United States dollar in both the official and parallel foreign exchange markets after a difficult trading week.
The recovery came as Nigeria’s gross external reserves climbed above $54.72 billion, providing additional support for the local currency amid sustained foreign exchange inflows.
Source: Legit.ng
