The naira maintained the N1660-7 range against the haven currency in the unofficial market despite high volatility in the dollar index following President Trump’s swearing-in.
Price action shows that naira bulls have little incentive to break below the N1500/$ resistance line, as holders and speculators increasingly hedge on the dollar.
The local currency is exhibiting an unusual period of stability one year after a significant drop in the naira’s value following President Tinubu’s assumption of office.
Illicit demand is indeed the key factor creating stress within Nigeria’s foreign exchange market, as stated by Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.
“Nigeria’s biggest problem with FX is not the supply of FX; it is the illicit demand for FX,” Oyedele remarked during The Covenant Nation’s Platform Economic Outlook for 2025 event.
“The impact of that discretionary demand increases with the extent of corruption. Even in the private sector, it is taking place. Although most Nigerians have never seen a dollar banknote, members of the elite, high-net-worth individuals, super-rich people, and a segment of the middle class have. The belief that the value of the naira will decline is a self-fulfilling prophecy. All of your savings are being converted to US dollars. Over the past 18 months, the balance of domiciliary accounts has grown by over $6 billion. There is more than $30 billion remaining.”
The CBN governor, Olayemi Cardoso, additionally suggested a detailed strategy for curtailing the commoditization of the naira and restoring its status as a viable currency for the nation.
In this regard, the committee of heads of bank operations held their first-ever conference on the topic, “The Way Forward: Naira Commoditization,” over the past weekend in Lagos.
As Cardoso pointed out, the commoditization of the naira poses a real threat to the lives of ordinary Nigerians who use the naira for transactions and to the economy integrated with the banking sector. He highlighted the process of naira commoditization as the deconstruction of the national unit’s dignity, where it ceases to function as a medium of exchange for goods and services of economic value and transforms into a capital-tradable asset with shifting value.
He maintained that the naira is more than just a currency; it is an integral part of Nigeria’s identity. However, in recent times, the naira has been treated more like a commodity than a currency.
President Donald Trump Strengthens the Dollar
- President Donald Trump hinted that the United States might soon impose tariffs on Canada and Mexico, giving the dollar some strength amid a volatile trading session.
- The dollar index recovered 0.6 per cent to 108.65 index points after losing 1.2 percent overnight, marking the largest daily loss since late 2023.
- It was reported that Trump’s team was considering a 25 percent tariff that could be announced on February 1, but provided no further details.
- Officials had previously indicated that any new taxes would be applied in a “measured” manner, which would have been hugely beneficial for currencies exposed to trade, so the remarks were unexpected. The memo instructed agencies to look into and address ongoing trade deficits.
- Market players anticipated that Trump would begin with China, imposing tariffs of between 10–20% on goods and then gradually increasing them.