The Nigerian naira’s exchange rate stayed muted against the US dollar on the unofficial secondary foreign exchange market after the CBN decided to keep the MPR unchanged for the 7th straight time.
However, the Naira couldn’t take advantage of the greenback while the dollar index sank yesterday.
The naira stayed flat at N1,535/$, the same rate as Monday, indicating some level of stability in the informal market.
The recent depreciation at the official window aligns with the CBN’s decision to maintain rates after the 301st MPC meeting. Despite the currency’s decline, the CBN appears committed to its tighter monetary policy aimed at controlling inflation and stabilizing the economy.
CBN governor Olayemi Cardoso said the perception of the naira is improving, likely due to reforms implemented by the CBN and better macroeconomic conditions.
He spoke during a post-MPC press briefing where he announced that the MPC unanimously decided to keep all benchmark rates unchanged for the third straight time, allowing inflation to slow further.
All 12 MPC members agreed to hold the Monetary Policy Rate at 27. 5%, with the asymmetric corridor at + 500/- 100 basis points, while keeping the Cash Reserve Ratio at 50% for deposit money banks and 16% for merchant banks, and the liquidity ratio at 30%.
According to the CBN chief, the monetary policies introduced by the Nigerian Apex Bank, like the market-determined exchange rate and tighter monetary policies, yielded positive results. Mr.Yemi Cardoso highlighted the growing willingness of the Nigerian populace to conduct business in the local currency as an important indicator.
The CBN head also disclosed the narrowing gap between official and parallel exchange rates, as well as increased circulation of Naira payment instruments outside the country, as signs of lasting policy shifts.
“There is a lot of transformational stuff going on right now,” he said. “They are also here to stay. When you travel, you can now use your Naira cards at certain banks. Those things are not going away. They are not a temporary solution.”
The dollar index trade near two-week low
The greenback managed to hold its ground on Wednesday after falling for three consecutive sessions, although it remains near a two-week low. This stabilization comes due to improved risk appetite among investors following the trade deal between the US and Japan.
The Dollar Index, which tracks the US dollar against six of its main rivals, remains significantly diminished, recovering some of its value to float at 97.11, a steep low compared to the nadir of July 10th.
Moreover, it has lost more than 6% since early April, when Trump made waves by announcing “Liberation Day” tariffs, igniting a trade war. Although many of those tariffs were later postponed in favor of more friendly deals, the dollar continued to lose value.
The markets, however, have gained enough to balance out the impact of Trump’s trade war with Japan, attempting to sweeten the deal and ease fears of a broader trade conflict.
President Trump announced that the US will introduce new tariffs on Japanese goods of 15% instead of the previously proposed 25%, which was to take effect on August 1.
He further added that Japan plans to invest $550 billion into its economy. Since the tariff saga began, the dollar has suffered the most among all currencies, and this news has since boosted investors’ risk sentiment, reducing the dollar’s appeal as a safe-haven asset.
