Dollar Gains Against Naira, As Foreign Exchange Traders Await CBN’s MPC Decision

On Tuesday, 23 May, the United States Dollar was sold to investors and exporters in the official market at the rate of N464.42 kobo/$1.

They were sold the American greenback at N0.92 kobo more than the currency was priced at the close of trading on Monday, 22 May, which was N463.5 per Dollar.

This signifies that the value of the Naira depreciated by -0.19 per cent between Monday and Tuesday against the Dollar.

Prior to the exchange rate between the Naira and Dollar closing at N464.42 kobo/$1, traders were offered the USD at a high and low rate of N632/$1 and N460/$1 respectively during intra-day trading. 

Prime Business Africa gathered that even with the exchange rate shooting up to N464.42 kobo/$1, traders transacted $215.91 million in foreign exchange. 

This contrasted with the $106.84 million transactions that were traded in the investor and exporters’ window the previous day.

The foreign exchange transactions were revealed by FMDQ Exchange, which showed forex transactions rose by $109.07 million or 102.08 per cent. 

Prime Business Africa notes that the Naira became weaker as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) meet to deliberate on the country’s Monetary Policy Rate (MPR) or interest rate. 

Interest rate movement affects foreign exchange and trade. An increase in interest rate will result in the cost of borrowing to rise and traders in need of Naira to buy foreign exchange will have to pay more interest on credit to import goods. Traders will pass the cost of higher interest on credit to consumers.

The MPC met on Tuesday and also meeting on Wednesday, 24 May, to decide if the interest rate should be increased, reduced or held at the current 18 per cent.