By Atoyebi Nike
The Nigerian naira gained about 1.2% against the U.S. dollar over the past week, strengthening from N1,519/$ to N1,497/$ as the Central Bank of Nigeria (CBN) holds its Monetary Policy Committee (MPC) meeting to decide on interest rates.
The sharpest daily movement was recorded on September 19, when the exchange rate dropped by 0.66%. The two-day MPC session, which began on Monday, September 22, will conclude with a policy announcement on Wednesday, September 23.
Market analysts expect the CBN to lower its benchmark interest rate from 27 to 25 basis points, citing a firmer naira, declining inflation which eased for the fifth straight month to 20.1% in August and rising external reserves.
Support for the local currency has been boosted by higher oil production, reduced oil theft, and stronger natural gas revenue. Foreign reserves have improved, while speculative trading has declined following recent CBN reforms.
On the parallel market, the naira also firmed, trading between N1,515 and N1,517/$. Technical indicators show the USD/NGN pair testing resistance at N1,519-N1,524/$ and support around N1,476-N1,485/$.
The stability is further reinforced by China-Nigeria trade relations under a $2 billion swap deal, which allows more transactions in naira, reducing pressure on dollar demand. Stakeholders say the arrangement could ease annual forex pressure by up to $20 billion.
Globally, the naira is benefiting from a weaker U.S. dollar, which has fallen 10% this year amid expectations of looser Federal Reserve policy. Last week, the Fed cut rates by 25 basis points to 4 percent, with Chair Jerome Powell calling it a “risk management cut.”
Traders are watching closely for more signals from Fed officials, as their comments could sway the dollar’s strength and, indirectly, the performance of the naira.
