Naira Exchanges Dollar at New Rate After CBN Makes Changes to Interest Rate, Others

Naira Exchanges Dollar at New Rate After CBN Makes Changes to Interest Rate, Others

  • The CBN raised interest rate at the recently held meeting of the monetary policy committee
  • This reflected little or zero changes in the value of the local currency against the dollar
  • The unofficial market for the naira traded flat to close at its N1,450 per dollar trading rate

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

On Wednesday, May 22, the naira strengthened slightly against the US dollar in the foreign exchange market.

New exchange rate emerges
The Naira remained unchanged to retain its N1450 per Dollar trading rate. Photo Credit: CBN, Bloomberg
Source: UGC

The local currency moved up against the dollar from N1465.68 on Tuesday to N1462.59 on Wednesday, according to FMDQ data.

This represents a N3.09 per dollar gain within 24 hours compared to its closing rate on Tuesday.

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Since last Friday, Nigeria's currency has increased four times in a row after concerns that the local currency may be headed to its lowest at N1,900 per dollar.

In the unofficial market, however, the naira remained unchanged and retained its N1450 per dollar trading rate.

The MPC factor

The benchmark interest rate, known as the monetary policy rate (MPR), was recently raised to 26.25% by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria.

The new rate is 150 basis points higher than the 24.75% rate that was in place previously.

Following the 295th MPC meeting in Abuja on Tuesday, May 21, 2024, Olayemi Cardoso, the Governor of the CBN and Chairman of the MPC, revealed the new rate.

The CBN said that the Asymmetric Corridor surrounding the MPR was set at +100 and –300 basis points and that it would maintain the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45%.

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This new rate is an indication of further tightening to curb the excess supply of money in circulation.

Explaining how the new rate will affect the market, Charles Abuede, a financial analyst explained said that investors will start prowling for higher returns in this time.

" So, investment banking firms or financial services providers will do their risk analysis and impact assessment in this period.

He added that Fixed-income Securities (CPs) will likely see repricing for the yields while capital raising for corporates may likely see some setbacks due to the current interest rates. So, it's the wrong time to raise capital

CBN withdraws implementation of cybersecurity levy

Legit.ng reported that the controversial 0.5% cybersecurity fee that banks were ordered to impose on electronic transactions has been withdrawn by the CBN.

Chibuzo Efobi, the director of the payment system management department, and Haruna Mustafa, the director of the financial policy and regulation department, signed a statement announcing the circular's withdrawal.

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CBN issues new directives on street trading of foreign currencies as naira falls

In its circular dated May 6, 2024, the apex bank instructed the levy deduction to be sent to the Office of the National Security Adviser (ONSA)- managed National Cybersecurity Fund (NCF).

Source: Legit.ng

Authors:
Zainab Iwayemi avatar

Zainab Iwayemi (Business Editor) Zainab Iwayemi is a business journalist with over 5 years experience reporting activities in the stock market, tech, insurance, banking, and oil and gas sectors. She holds a Bachelor of Science (B.sc) degree in Sociology from the University of Ilorin, Kwara State. Before Legit.ng, she worked as a financial analyst at Nairametrics where she was rewarded for outstanding performance. She can be reached via zainab.iwayemi@corp.legit.ng

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