The naira had a strong start to the week amid the weakening US dollar and its improved price action.
The Nigerian currency last traded at N1,485.5/$ at the Nigerian foreign exchange market.
The Naira’s lowest point has been N1,637/$ in 2025.
The local currency is projected to stabilize within the range of N1,450/$- N1,550/$, although there could be a negative swing if the price of oil falls below $70 a barrel.
Currency traders are buying dollars at N1,485/$ and selling them at N1,505/$ in Lagos’ informal market.
The Nigerian currency’s recent surge can also be attributed to its increased popularity as a carry trade pair. A carry trade happens when currency traders take out a loan from a country with low interest rates and invest in another with higher yields. In this case, interest rates have remained above 27% in Nigeria over the past few months, while they have remained below 5% in the US.
Investors have found it feasible to allocate funds to Nigerian bonds in recent months because of this divergence. This carry trade might likely diminish as the CBN cuts interest rates. It lowered rates by 0.5% last week, and officials alluded to more cuts this year.
The naira’s latest price action has also improved because of its technicals. Latest price action showed the local currency created a death cross when the 200-day and 50-day moving averages crossed. An inverse cup-and-handle pattern, which frequently results in more upside, has also been formed by the pair.
A move below the cup’s lower side at N1,476/$ will therefore indicate further upside, possibly reaching N1,400/$ soon. Naira fundamentals survived a scare after the chairman of the Naira for Crude Technical Committee intervened, and the Dangote refinery announced that sales of gasoline denominated in naira would resume immediately.
Customers were encouraged to start ordering in naira for free delivery to pre-selected locations in Nigeria, as well as for self-collection.
The refinery’s decision to stop selling local currency earlier, which had sparked worries about fuel availability and pricing in Africa’s most populous economy, has now been reversed. Africa’s largest refinery, Dangote Refinery, started supplying gasoline to the domestic market earlier this year, but because of Nigeria’s wider problems with oil production, it had issues obtaining crude feedstock
U.S dollar index begins the week on a red note
The US dollar fell 0.2 per cent on Monday, marking the start of an event-filled week. The US government might shut down as both political parties stand by their positions. Several US economic data points are also being released this week, including the monthly jobs report scheduled for Friday.
The Dollar Spot Index fell to its lowest level since 2022 in mid-September, but it has since risen. Currency traders are lowering their expectations for additional Fed interest rate cuts, boosting the dollar’s recent increase in value.
Bets on policy relief reversed after Fed Chair Jerome Powell recently reiterated his view that policymakers may encounter difficulties in the future because of inflation and labor market outlook risks.
The overall picture remains murky: tariff risks still exist, they hurt global trade, weigh on prospects for global growth, and cause the redesign of supply chains, which makes the world more fragmented, but their direct market impact has diminished.
US jobs and inflation are more important since the Fed is responsible for controlling the bullish trend. Rates are being lowered, and the Fed would be the one purchasing government bonds if things got bad. The news on that front is positive. The US GDP grew by an impressive 30.8 per cent last week, which sparked concerns about whether Fed cuts were necessary.
However, Friday’s PCE data was exactly on point. The core PCE index, the Fed’s preferred measure of inflation, remained stable at 2 per cent while personal income and spending increased more than anticipated.
That is consistently and noticeably more than the Fed’s 2 per cent target. However, given the combination of the US’s growing debt and the Fed’s strong fiscal support, the Fed will accept higher inflation.
