The Nigerian naira weakened to N1,550 against the American dollar in the black market amid increased demand for the greenback in West Africa’s largest economy.
The naira opened the week at N1,500 per dollar in the unofficial market and had stayed within that rate for more than two weeks before its recent low, despite the Central Bank of Nigeria’s (CBN) ongoing reforms in the Nigerian FX market.
However, according to CBN data, the Nigerian naira closed at N1,512 per dollar on the official market on Thursday.
The managing director of Financial Derivatives Company Limited, Bismarck Rewane, claims that the naira’s recent weakness was caused by higher demand for foreign exchange than there is supply.
“Some adjustments are unavoidable when a currency is misaligned from its fair value,” he said. “This year, the misalignment is lower, and the path to balance will be less difficult than last year, when it reached 43%.”
The dynamics of the Nigerian foreign exchange market are still somewhat erratic. Foreign investors withdrew N455.62 billion from the Nigerian stock market in 2024, greatly exceeding all inflows, and escalating worries about investor confidence despite the Central Bank of Nigeria’s efforts to stabilize the naira.
Markets blamed this on the naira’s volatility, emphasizing that it led to uncertainty and that inflation also made the future unclear for international investors.
NGX data showed that although foreign transactions totaled N852.03 billion for the year, outflows contributed 53.47 percent of the total value, while inflows totaled N396.41 billion.
U.S. Dollar Index Hits a Four-Month Low Amid High Geopolitical Uncertainty
The haven currency fell nearly to a four-month low on Friday as investors waited anxiously for jobs data anticipated later in the day. U.S. tariff proposals increased uncertainty and raised fears about growth prospects for the world’s largest economy.
- The Japanese yen held steady against the U.S. dollar, which has been its strongest since early October, while the Swiss franc hit a three-month high.
- U.S. President Donald Trump announced another reprieve of duties aimed at Canada and Mexico. The greenback also experienced slight drops against the Canadian dollar and Mexican peso. However, currency traders remained cautious after Trump announced he would impose equal tariffs on all U.S. trading partners on April 2.
- President Trump declared he would apply equivalent tariffs to all U.S. trading partners on April 2, the day the exemption expires.
- Market participants will evaluate whether the economy is about to slow down as they digest Friday’s nonfarm payroll data following a barrage of conflicting economic data from the U.S. this week.
Jerome Powell, the U.S. Fed chief, will likely comment on the jobs report when he speaks on the economic outlook this Friday.
The markets have already priced in three rate cuts from the Fed for the rest of the year.
U.S. data released on Thursday showed mixed signs, adding to the growing concerns about an impending slowdown in the world’s largest economy.
The international outplacement company Challenger, Gray & Christmas tracked 62,242 federal job losses from 17 agencies disclosed in February. Planned layoffs increased to 172,017 in February due to the federal government’s plan to trim its labor force.
American businesses hurried to bring goods ahead of import levels in January, causing a spike in imports. This drove the trade deficit to a record high, and trade was on track to reduce GDP in the first quarter.
The euro reached its highest level in four months in the previous session, trading at about $1.08, thanks to the European Central Bank’s aggressive rate cut and rising European bond yields, initiated by Germany’s massive spending program. The euro was aiming for its biggest weekly increase since March 2009, gaining more than 4% in a week.
The European Central Bank increased its inflation prediction for the eurozone from 2.1% three months ago to 2.3% this year. Longer-term inflation indicators in the European Union have increased dramatically, from about 2.05% at the beginning of the week to 2.24% on Thursday.
