Naira Appreciates Against US Dollar As CBN Retains Interest Rates

The Nigerian currency, the Naira, has continued its upward trend against the dollar in the parallel foreign exchange market.

On Thursday, the Naira improved to ₦1,500 per dollar in the black market, a rise from the ₦1,505 rate observed on Wednesday.

A Bureau de Change operator in Wuse Zone 4, Abubakar Alhasan, who spoke with Daily Post, noted that “the minimum selling rate for dollars on Thursday was ₦1,500, compared to ₦1,505 the day before.”

Naijaonpoint reports that this indicates that the Naira appreciated by ₦5 against the dollar from the ₦1,505 rate recorded on Wednesday.

The Naira has consistently shown appreciation in the parallel FX market.

In contrast, the official market rate for the Naira was ₦1,509.03 per dollar on Wednesday, up from ₦1,507.2 on Tuesday, as reported by the Central Bank of Nigeria (CBN).

The rates across different FX markets have shown a reduction in discrepancies, leading to a convergence of exchange rates.

Meanwhile, the CBN has decided to maintain all monetary parameters during its 299th Monetary Policy Committee meeting, which marks the first session of 2025.

Following the meeting, CBN Governor Olayemi Cardoso addressed the media, stating that the committee reached a unanimous agreement to keep all parameters unchanged.

Consequently, the decisions made include maintaining the Monetary Policy Rate (MPR) at 27.50 per cent, preserving the asymmetric corridor around the MPR at +500/-100 basis points, keeping the Cash Reserve Ratio for Deposit Money Banks at 50.00 per cent and for Merchant Banks at 16 per cent, and retaining the Liquidity Ratio at 30.00 per cent.

The committee expressed satisfaction with recent macroeconomic developments, which are anticipated to have a favourable effect on price dynamics in the near to medium term.

Governor Cardoso pointed out the stability observed in the foreign exchange market, which has led to an appreciation of the exchange rate, as well as a gradual decrease in the price of Premium Motor Spirit (PMS).

However, he acknowledged the ongoing risk of persistent inflationary pressures, primarily driven by food prices.

The committee emphasized the advantages of improvements in the external sector for exchange rate stability, including the convergence of rates between the Nigeria Foreign Exchange Market (NFEM) and the Bureau de Change (BDC).

They urged the bank to continue its efforts to enhance market liquidity.

In response to inquiries regarding the balance between stimulating growth and controlling inflation, Governor Cardoso remarked that these are trade-offs.

“We can see that accretion to reserves has been consistent, and at one point in time, may I remind everybody that we achieved the highest level of reserves in the past three years. We also continued to see inflation gradually beginning to decelerate,” the CBN governor noted.

He argued that there’s greater confidence in the markets, showing that the CBN is on the right course.

Cardoso said: “Obviously, as that happens, we are in a better position to begin the process of moderating rates because stability is very important, and if investors do not see stability, they do not come to those markets.

“So our own objectives have been and will continue to be to achieve stability in the foreign exchange markets and the financial markets. That’s our objective. And as long as that happens, we are confident that we will begin to see more investments coming in, which should spur the badly needed growth.

“One other thing I would add to that is the fact that now currency is a lot more competitive, and with that competitiveness, we have seen an increasing interest from the international investors to want to come and invest in a country’s future.

“We will continue with the orthodox monetary policies that we have embarked upon. We have seen the outcome and are in a positive direction, and we will certainly stay that course. We will be vigilant. We will not take anything for granted.

“We believe that inflation has been too high for too long. So our objective in the medium to long term is to ensure that we are able to bring this down from the double-digit to the single.”