Naira takes a hit, drops to N1,500.79 amid Dollar surge

The naira fell by 71 basis points in the official market due to increased pressure from the US dollar index, while it remained stable in the unofficial market.

According to FMDQ data, the naira fell by 0.71% against the dollar, closing at N1,500.79 versus N1,490.2/$ on Monday at the Nigerian Autonomous Foreign Exchange Market.

Currency traders explain the recent surge in dollar demand to seasonal reasons such as summer vacations and importers’ need for foreign currency to buy raw supplies.

Fresh foreign cash inflows into Nigeria’s economy have helped to support the naira’s recent stability. The World Bank and Afreximbank have contributed around $6 billion, strengthening Nigeria’s foreign exchange reserves and helping to keep the naira stable.

Central Bank of Nigeria (CBN) Governor Olayemi Cardoso expressed confidence in the future of the foreign exchange market, citing the current time of relative calm. In the official market, the naira has fluctuated between N1,473 and N1,500/$ over the last month.

“In terms of volatility, we have seen the worst. We are pleased that willing sellers and purchasers can now transact business in the market,” Cardoso stated. He added, “We’ve seen a lot of stability within the market; there’s hardly been any movement in the currency in the past two or three weeks after a period of volatility.”

On the international front, the US dollar rose on hawkish comments from Federal Reserve officials and strong housing market statistics. Fed Governor Michelle Bowman stated that keeping the present policy rate “for some time” would likely be enough to contain inflation, indicating a cautious stance to any future rate decreases.

Despite mixed economic statistics from the United States, the dollar continued to strengthen. Single-family home prices grew steadily in April, up 0.2% from the previous month. However, consumer confidence in the United States fell slightly in June, to 100.4 from 101.3 in May.

The euro lost 20 basis points against the dollar, finishing at $1.0714, owing to political uncertainty in France following President Emmanuel Macron’s announcement of early elections. Currency traders are also looking ahead to the impending presidential debate in the United States and the release of the Fed’s preferred inflation measure, the US personal consumption expenditures (PCE) price index, which is expected on Friday.