Naira Steadies as CBN Chases Inflation with 26.5% Interest Rate
The naira steadied against the US dollar at the official window as the Central Bank of Nigeria continues to chase headline inflation with 26.5% policy rate retention.
The local unit traded at N1370.3431 per dollar at the Nigerian Foreign Exchange Market (NFEM) on Wednesday, up from N1370.8717 the previous day, with FX turnover settling at $68.020 million across 112 deals, down from $72.423 million.
Intraday transactions at the official window were consummated between N1372.5000 and N1374, reflecting tight liquidity conditions at the NFEM window.
The CBN’s monetary policy committee (MPC) kept the benchmark interest rate at 26.5% amid a negative inflation outlook. Nigeria’s headline inflation surged for the second month in a row since February, when the US, Israel and Iran war started.
The geopolitical tensions that triggered the global energy crisis are in the Nigerian government’s favour, as it has continued to earn higher foreign receipts from hydrocarbon sales, but the development has placed undue pressure on household spending.
A surge in the global oil market has lifted petrol pump prices in Nigeria to an average of N1400, further redistributing wealth in favour of the government while citizens bleed from high consumer goods prices.
For the monetary policy committee, keeping the interest rate at 26.5% is all that can be done to already struggling private sector with higher borrowing costs.
Yesterday, the Naira closed slightly weaker, depreciating by a marginal 1bps against the U.S. dollar, according to forex market data obtained from the CBN.
The Naira lost ₦0.17 against the U.S. Dollar, driven by stronger Dollar demand than Naira demand. The recent stability in the Naira has been linked to sustained foreign portfolio inflows, improved market liquidity, and continued confidence from the CBN’s FX reforms.
Oil prices were down around 1% on Tuesday after U.S. President Donald Trump said he had paused a planned attack on Iran to allow for negotiations to end the war.
Brent crude, as of 19:30 HRS, traded around $110.45 per barrel, reflecting a decline of 1.47% form previous close, while U.S. West Texas Intermediate (WTI) fell 1.02%, trading around $103.32 per barrel.
Conversely, Gold prices fell by more than 1% on Tuesday on a firmer U.S. dollar and as persistent inflation fears kept interest rate hike expectations and Treasury yields high.
Spot gold price fell 1.84%, to trade around $4,497.39/oz, while U.S. gold futures shed 1.26%, hovering around $4,500.37/oz. UBA Champions Diaspora Healthcare Investment at ANPA America Symposium
