Emmanuel OchayiThe Nigerian naira started Tuesday’s trading session at N1,510 per dollar on the black market but later strengthened in the official foreign exchange market. This comes as market transparency improves under ongoing reforms by the Central Bank of Nigeria (CBN).
Data from the CBN revealed that the naira’s indicative exchange rate dropped slightly, closing at N1,499 per dollar on Monday, compared to N1,500 per dollar recorded last Friday. The local currency had appreciated in the previous week, and despite recent fluctuations, it has remained relatively stable.
Join our WhatsApp ChannelNaira Loses Value in Official Market, Trading at N1,498.98 per Dollar
In the official market, the naira recorded its worst trading session of the week, closing at N1,498.98 per dollar. This represents a N6.49 drop from Friday’s settlement rate of N1,492.49 per dollar, marking a 0.43 percent decline.
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The CBN governor has continued to stress the importance of naira stability, assuring that the apex bank will intervene when necessary. The bank has also promoted transparency in the foreign exchange market, which has helped to control speculation and reduce volatility.
Market Transparency Boosts Naira’s Stability
The introduction of the Nigerian Foreign Exchange Market FX Code and the Electronic Foreign Exchange Matching System has contributed to greater efficiency in forex trading. These reforms have helped curb market manipulation and increase liquidity, supporting the naira’s relative stability.
Experts believe that the increased transparency in the market will encourage investor confidence, which could further stabilize the naira against the dollar and other major currencies.
Geopolitical Tensions Affect Global Currency Markets
While the naira faces internal market pressures, external global factors also play a role in shaping its performance. The dollar index weakened following a surprise decline in U.S. consumer spending and increased geopolitical risks.
A heated exchange between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky led to panic in global markets. The sudden cancellation of their scheduled press conference and Trump’s warning, “You are gambling on World War III, but you don’t have any cards in right now,” caused investors to shift toward safe-haven assets, further influencing currency markets.
The dollar index, which measures the strength of the U.S. dollar against a basket of major currencies, recorded its biggest monthly decline since September, dropping by almost 1 percent in February.
Trade Uncertainty and the Naira’s Position in Global Markets
The global trade landscape remains uncertain as the U.S. imposed fresh tariffs on China, Canada, and Mexico. Trump also hinted at extending tariffs to the European Union, a move that could escalate trade tensions.
The ongoing trade war raises concerns about its impact on global trade balances, including the performance of the naira. Analysts warn that if geopolitical tensions continue to rise, emerging market currencies like the naira could experience increased volatility.
Interest Rate Expectations and the Naira’s Outlook
The U.S. 10-year Treasury yield saw a slight increase above 4.20 percent, signaling changing market expectations for interest rates. While higher yields typically strengthen the dollar, traders have been betting on a rate cut by June.
If the U.S. Federal Reserve lowers interest rates, it could weaken the dollar, creating potential support for the naira. However, traders remain cautious, closely monitoring how U.S. policymakers respond to economic uncertainties.
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.
