Nigeria's Naira Shows Resilience Despite Rate Cut
The Nigerian naira showed resilience against the US dollar at the start of this week, bucking expectations following the Central Bank of Nigeria's (CBN) decision to lower its benchmark interest rate from 26.5% to 23%. The move raised questions about the impact on demand for naira assets.
The naira gained ₦1.69 against the dollar at the start of the week, closing Friday at ₦1,329.51 per dollar amid increased activity in Nigeria's official foreign exchange market. However, it surrendered part of its gains over three consecutive sessions, showing that its recovery remained limited.
The CBN's Monetary Policy Committee reduced the Monetary Policy Rate by 350 basis points on Tuesday, September 22, citing a need to bring the policy rate closer to prevailing market rates and improve the effectiveness of monetary policy. According to Premium Times, Governor Olayemi Cardoso explained that the adjustment aimed to achieve these goals.
The official forex turnover rose 8.9% to $2.25 billion between Monday and Thursday, with Wednesday recording the highest trading activity at $732.45 million across 389 deals. This increase in trading activity suggests improved FX liquidity, which has supported the naira's stability against the dollar.