Emmanuel OchayiThe naira’s four-day winning streak ended on Thursday as it depreciated by 1.55%, closing at 1485.66/$1 on the official market.
This marks the currency’s lowest level since March 20, when it traded at 1492.61/$1, according to the latest data from the FMDQ.
The past week saw the naira performing well against the US dollar, beginning with a significant appreciation of 2.45% on Friday, May 17, when it traded at 1497.33/$1. Forex turnover was relatively low that day, at $83.5 million, which was a 69.40% decline from the previous trading day.
On Monday, May 20, the naira further strengthened to 1468.99/$1, marking a 1.93% appreciation. Forex turnover increased notably to $161.41 million, a 93.31% rise, indicating renewed confidence in the market. “The market showed positive signs at the start of the week, reflecting investor optimism,” said financial analyst, Tunde Adebayo.
The trend continued on Tuesday, May 21, with the naira trading at 1465.68/$1, gaining 0.23%. Forex turnover surged to $268.17 million, a 66.14% increase. “We saw a substantial boost in market activity on Tuesday,” remarked Adeola Akintola, an economist.
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On Wednesday, May 22, the naira appreciated slightly by 0.21%, closing at 1462.59/$1. However, forex turnover dropped significantly to $123.45 million, a 53.97% decrease, indicating a potential slowdown in market activities.
Thursday, May 23, marked a reversal as the naira depreciated by 1.55%, closing at 1485.66/$1. Forex turnover for the day was $167.55 million, reflecting a 35.72% increase from the previous day. “The depreciation on Thursday was unexpected given the week’s earlier performance,” commented market trader, Chidi Okoro.
The depreciation comes two days after the Central Bank of Nigeria’s (CBN) 295th Monetary Policy Committee (MPC) meeting, where the CBN increased the monetary policy rate (MPR) by 150 basis points to an unprecedented 26.25%. This hike, though lower than the previous increase of 200 basis points, is the highest ever, underscoring the CBN’s aggressive stance on monetary tightening to combat inflation.
CBN Governor,Yemi Cardoso, announced, “The policy rate hike aims to curb inflation and attract foreign investment, theoretically supporting the naira.”
Additionally, the CBN’s Nigerian treasury bill (NTB) auction on May 22 saw an offer of N508.98 billion, with subscription levels significantly surpassing the initial offer, highlighting the continued appetite for fixed-income securities in a volatile economic landscape.
Despite the oversubscription of N1.5 trillion, only about N638.98 billion was allotted to investors. “The recent MPR increase has made government securities more attractive,” explained investment analyst Bola Adigun.
The increase in forex turnover on Thursday suggests heightened trading activity, possibly driven by speculative actions and adjustments to market positions. “The fluctuations in the Naira’s value highlight the volatile nature of Nigeria’s forex market,” noted forex expert Ifeoma Eze.
The central bank’s efforts to stabilise the currency have shown some positive results, but the market remains vulnerable to external pressures and domestic economic dynamics. “While there have been gains, the Naira’s depreciation indicates underlying challenges,” concluded economist Femi Johnson.
As Nigeria navigates these economic complexities, the focus will remain on balancing monetary policies with market realities to ensure sustained currency stability.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
