The Nigerian naira has once again surpassed a key black market resistance level, settling at N1,170 against the greenback, as the US Fed prepares to announce its interest rate decision later today.
Nigeria failed to take advantage of the favourable opportunity in the global oil market to support its local currency.
The geopolitical instability that has hit Eastern Europe since February 2022 has caused adverse consequences for the economy and the lack of dollar liquidity in central bank vaults to keep the naira below the 1,000 naira/$ mark on the black market.
However, this has led the CBN to take unorthodox measures to support the local currency in the foreign exchange market. Currency traders are re-evaluating their strategies following reports that FG plans to digitize forex transactions and discourage speculative demand and cash hoarding.
Sources of FX liquidity remain largely elusive. Nigeria’s largest source of dollar revenue is from oil sales, but Nigeria produces less than OPEC’s daily quota of 1.8 million barrels per day, which is decreasing month by month despite rising oil prices.
Additionally, recent geopolitical developments, including conflict in the Middle East and the ongoing conflict between Russia and Ukraine in Eastern Europe, have increased demand for the dollar.
Market speculators believe demand for the US dollar will skyrocket as investors seek refuge in safe-haven currencies during this period of increased uncertainty.
For the second meeting in a row, the Fed is most likely to maintain its policy rate at 5.25%
The language in the statement about the likelihood of further tightening as well as Chairman Powell’s remarks about the policy outlook could increase volatility later today US Fed Chairman Powell, while earlier acknowledging the recent tightening of financial conditions in the world’s largest economy, left open the possibility of raising interest rates.
Additionally, strong U.S. economic data and the perception of higher long-term interest rates have triggered a return to rate cuts in 2025.
That said, for consolidation to be near This translates into a reversal, the US exception – the relatively better performance of the US economy compared to the rest of the world and a hawkish Fed – should reverse course. Until then, it may be too early to conclude that the dollar has peaked.
Rising US government debt yields have added to the strength of the US dollar, leading to an increase in the value of the dollar
Price actions highlighted that the US dollar index’s rally appears to be stretched market diversity, as measured by fractal dimensions, appears to be low as the DXY Index hit a multi-month high last month.
On Tuesday, the dollar index declined for the third straight session, testing the 106-support level.
Thus far, additional sidelined trade appears to be the most likely scenario going forward for the index.
The theme’s breakout suggests a possible move to the weekly high at 106.89, which is just ahead of the 2023 high of 107.34 and before the round level at 107
Nevertheless, when interest rate differentials change against the U.S. dollar,markets predict that the naira will strengthen against the dollar in the second half of next year into 2025.
The above statement is still a tall order given Treasury yields and the hawkish Fed.
IT IS UNFORTUNATE THAT NAIRA HAS NO DEFENCE IN ANY WAY. FOR NAIRA TO GAIN WAY AGAINST ANY MAJOR CURRENCY, WE MUST HAVE TO EXPLOIT AGRICULTURE AND OTHER SECTORS OF THE ECONOMY,EXAMPLE gas, solid minerals, local production etc. BUT AGRICULTURE MUST BE FULLY EXPLOITED NOW OR NEVER. AND NAIRA WILL DIE WITH THE COMPLETE COLLAPSE OF THE ECONOMY. AGICULTURE IS THE ONLY LIFE LINE OF NAIRA NOW. THIS IS BECUASE THE PRESENT ECONOMIC PROBLEM IS CONPLICATED WITH HUNGER, DEPRESSION, UNEMPLOYMENT AND LACK OF REVENUE. NIGERIA IS LUCKY TO HAVE A FERTILE LAND FOR FOOD CULTIVATION. AS IT IS NOW THE GOVT. HAVE TO GO INTO DIRECT FOOD PRODUCTION AS SOON AS POSSIBLE TO AVOID AN INPENDING DOOM THAT ABOUT TO HARMERTHIS COUNTRY, IF HUNGER IS NOT AVOIDED ANY MOMENT FROM NOW.
I purchased dollar today @1250 here in Lagos. Please visit black market to verify so we don’t keep deceiving others
WE NEED TO ENCOURAGE OUR FARMERS, DEVELOP OUR AGRICULTURAL SECTOR FOR THE COMMON GOOD AND TO GENERATE FOREIGN EXCHANGE THROUGH EXPORT. THIS IS URGENT, AND THE FEDERAL GOVERNMENT NEED TO TAKE IMMEDIATE ACTION.
Like PYRAMID RICE 2.00 ?
Well written.
The problem of Nigeria is broad and this can only make a U-turn only and only when the government focus on agriculture and exporting instead of importation . Insecurity has led to the collapse of farming in major Africa countries . That’s the major reason why many Africa countries has to give excuses when any devastating crisis breaks out in any foreign countries. If the new government doesn’t take major step in tackling these issues of insecurity and exportation rather than importation there might be huge consequences in the nearest future .