The naira, week on week, posted some recovery against the haven currency at the unofficial market as the Central Bank of Nigeria set in motion its first Monetary Policy Committee (MPC) meeting under Mr. Yemi Cardoso, with many analysts expecting a significant increase in the benchmark interest rate, also known as the monetary policy rate.
The naira initially traded around N1600 to the USDT early Monday morning at the time of drafting this report, posting a weekly gain of more than 25% for the week, although this has moved above the N1600 mark as at the time of this report.
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Binance and Cryptocurrency Usage
A significant number of young Nigerians have become increasingly dependent on Binance to buy digital assets as a hedge against rising inflation and currency devaluation.
Notably, for Nigerian foreign exchange traders, the Binance P2P platform has emerged as a key location for price discovery.
Although Nigeria has not officially stated that it has blocked access to Binance and other cryptocurrency platforms, some Nigerian users of these sites have complained about not being able to access the platform on their X accounts.
These digital service providers have been major players (reference points) in the FX market of the nation, frequently acting as standards for regional FX rates.
The government wants to take control of the naira’s value and maintain its place in the financial system, so it’s restricting access to these platforms.
Monetary Policy Expectations
Following a few missed monetary policy sessions, Nigeria is expected to implement two aggressive interest rate hikes in less than two months to control inflation and strengthen the naira, according to a Reuters poll released on Friday.
Nigeria’s monetary policy rate is expected to increase by 225 basis points to 21.00% on February 27 during Governor Olayemi Cardoso’s first monetary policy meeting, according to a survey conducted last week.
With the local currency still trading near its record low on the black market and January inflation increasing to 29.9 percent year over year, market pundits anticipate considerable policy tightening and the announcement of de facto system-wide tightening measures.
Dollar Index and Federal Reserve Outlook
Meanwhile, the dollar index used to gauge the dollar’s strength against major currencies posted decent gains in London trade on Monday, following its first weekly loss since 2024.
Though Federal Reserve officials cautioned that the bank was not in a rush to start lowering interest rates early, particularly given the persistently high inflation rate, the dollar managed to hold onto its three-month highs.
This week, the Fed’s main inflation indicator, the PCE price index data, is anticipated to provide additional hints about inflation.
Some additional Fed speakers are anticipated this week, most of whom will probably restate the view of higher interest rates for longer.
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