The exchange rate between the naira and the US dollar appreciated to N1,539.65 at the official Investor and Exporter (I&E) window on Wednesday, September 18, 2024, as the dollar weakened following a 50-basis point rate cut by the U.S. Federal Reserve.
This marks a 7.05% gain from the N1,656.49 recorded on September 17, 2024, when the naira briefly crossed above the N1,600 threshold due to heightened market volatility.
Naira has benefited from the dollar’s decline speculations, appreciating by 7.05% and returning to the N1,500 range.
If market conditions remain favourable, the currency could further appreciate into the N1,400 zone in the coming days.
Key Data Points:
Closing Exchange Rate: The naira closed at N1,539.65 on September 18, 2024, representing a 7.05% appreciation from the previous day’s rate of N1,656.49.
Intra-day Highs and Lows: During the trading session, the naira fluctuated between a high of N1,670.00/$1 and a low of N1,530.00/$1, before settling at N1,539.65.
Market Turnover: Wednesday’s market turnover reached $139.48 million, reflecting a 38% increase from $100.39 million on September 17. In August, total market turnover was $3.25 billion, a significant drop from $4.34 billion in July.
Parallel Market Rates:
In the parallel market, the naira opened trading at N1,590.01/$1. However, volatility pushed the currency to a high of N1,661.25/$1 and a low of N1,589.11/$1 before closing the day at N1,639.43/$1.
Market Trends:
Since mid-July, the naira has hovered within the N1,600 range, with brief fluctuations. On September 13, it appreciated to N1,639.20, only to decline to N1,656.49 on September 17.
Year-to-date, the naira has depreciated by approximately 76%, mainly driven by rising inflationary pressures and increased demand for dollars.
Despite these challenges, Nigeria’s external reserves saw a slight increase, rising from $36.305 billion on August 30 to $36.730 billion by September 10.
What to Know:
The U.S. Federal Reserve’s decision to cut interest rates by 50 basis points, from 5.50% to 5.00%, has weakened the dollar against major global currencies. Speculation about this rate cut began earlier in the week, causing negative sentiment toward the dollar.
By the time the Federal Reserve made the announcement at around 7 p.m. Nigerian time, the market had already priced in the impact, allowing the naira to gain strength.
As a result, the naira surged by 7.05%, closing at N1,539.65.
What to Expect:
- The naira may continue to benefit from the dollar’s weakness if negative sentiment toward the dollar persists.
- Investors’ cautious outlook on the U.S. economy could provide further opportunities for the naira to capitalize on.
- Improvements in macroeconomic conditions, such as easing inflation and reduced fuel scarcity, could further bolster the naira’s strength.
- Policymakers will need to make careful economic decisions to sustain the naira’s recovery.
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