The Nigerian naira has suffered a significant decline in value, falling below the critical N1,600/$ support level in the black market.
According to market fundamentals, the local currency is facing renewed demand pressure and an expanding supply gap, leading to another round of depreciation.
As of yesterday, the naira’s value had dropped from N1,625 per dollar last weekend to N1,635/$. Despite slight improvements in some macroeconomic conditions, the naira is struggling to maintain the critical N1,500 support level.
Market analysts warn that if the local currency cannot maintain its current levels, it may decline towards N1,800/$. The Central Bank of Nigeria plans to issue treasury bills valued at N2.2 trillion in the fourth quarter of 2024 to stabilize the naira and manage liquidity in the financial market.
In response to soaring inflation, the Nigerian apex bank has adopted a tight monetary policy, raising interest rates on treasury notes to provide more incentives in the Nigerian capital market. The interest rates on 364-day bills increased from approximately 15–18% at the end of 2023 to 21.49% in the first half of 2024.
Meanwhile, the U.S. dollar index has strengthened to its highest level since August 20, driven by rising long-term Treasury rates and inflation data indicating a smaller rate cut. The dollar index consolidated around 101.67 index points after reaching a peak of 101.79.
The Federal Reserve’s upcoming policy meeting will be closely watched, with traders expecting a quarter-point reduction in the Fed rate. However, employment data due on Friday may influence the extent of the expected rate cut.
