Nigeria's Central Bank's Efforts Unsuccessful as Naira Reaches Two-Month Low Versus Dollar

A Bloomberg report states that on Thursday, the naira depreciated by 5.1% to N1,533.99/$1, its lowest value compared to the dollar since March 20, based on rates from FMDQ, the platform that determines the official exchange rate.

The Central Bank of Nigeria's (CBN) recent efforts have not been effective in bolstering the naira against the dollar, as the naira fell to a two-month low before a rate decision on Monday.

A Bloomberg report states that on Thursday, the naira depreciated by 5.1% to N1,533.99/$1, its lowest value compared to the dollar since March 20, based on rates from FMDQ, the platform that determines the official exchange rate.

The report highlighted that this decline negated a 4% increase from the previous day, which occurred after the central bank's dollar sales in the market aimed at enhancing liquidity.

Samir Gadio, the head of Africa strategy at Standard Chartered Bank, was cited saying that the CBN's market intervention was between $80 million and $100 million.

This action significantly increased the foreign exchange market's liquidity to $289 million on Wednesday, with additional dollar sales by the central bank on Monday.

Under the leadership of President Bola Tinubu, the Nigerian government, which is approaching its first anniversary on May 29, has devalued the naira twice in the last year to attract investors and improve the currency's standing.

Nonetheless, the naira has experienced fluctuations, appreciating 40% from mid-March to early April, then declining 24% in the past month.

Gadio expressed that "Market participants may still have reservations" regarding the $1.3 billion in naira futures contracts due at the end of May.

He further questioned whether the majority of offshore investors with the May futures contract will opt for purchasing dollars or reinvesting their naira earnings into local securities.

The CBN's monetary policy committee is scheduled to convene next week, with expectations of an interest rate hike to maintain the interest of foreign investors in Nigeria.

To combat inflation, which has reached a 28-year peak, the regulator has raised rates by a total of 600 basis points across two sessions in February and March. Samir Gadio from Standard Chartered Bank reported that the CBN's intervention amounted to $80 million to $100 million.

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