The naira converged on Monday, as the local currency stabilized in the parallel market while increasing slightly in value in the official market.
The Nigerian currency marginally strengthened against the dollar at the first trading session of the week.
The naira settled at N1,534.21/$ in the Nigerian foreign exchange market.
The Naira also traded within a similar range on the black market, with rates between N1,535 and N1,540 per dollar.
Positive market reforms started by the CBN are evident in the alignment between the official exchange rate and the parallel market exchange rate.
A brief period of more parity between official and unofficial market rates resulted from these reforms, which were intended to attract capital flows.
Nigeria’s rapid improvement within the foreign exchange market mechanism, coupled with ongoing carry trade activities, has fundamentally shifted investor perceptions of the country, leading to increasing capital inflow and added pressure on the naira.
This has also enhanced the performance of naira-denominated bonds after a prolonged period of stagnation, with an 8.6% gain in July alone. These bonds rank first out of 23 countries on the Bloomberg EM Local Currency Government Universal Index, reflecting excellent and stable results throughout the year.
Bloomberg data shows that the Nigerian currency’s 30-day historical volatility decreased from 23% in December to 4.6% currently. The CBN maintained the benchmark rate at 27.5%, while inflation declined to 22.2% for the third consecutive month in June.
The federal government’s revenue increased by 43% in the first half, and recent tax reforms are expected to boost income collection. Nigeria’s GDP grew by 30% because of rebasing, which also improved debt ratios and facilitated new borrowing and higher ratings.
The US dollar gained strength following a trade deal between Europe and the world’s largest economy, Donald Trump’s August 1 tariffs appear to have sparked caution among most investors. This week, the focus shifts to the Federal Reserve and Bank of Japan interest rate decisions.
The Federal Reserve begins a two-day monetary policy meeting, with no rate changes expected. Markets are looking for potential rate cuts in the coming months. The Fed is anticipated to keep rates between 4.25% and 4.50%. During the FOMC press conference, all eyes will be on the statement regarding potential rate cuts in September. Key economic indicators, such as the second-quarter PCE inflation report and July’s Nonfarm Payrolls, will provide further insights into the US economy.
US President Donald Trump and European Commission President Ursula von der Leyen discussed a trade deal, where European exports to the US would be taxed at 15%, down from the previously considered 30%. Trump also announced on social media that trade talks with Cambodia and Thailand would resume after resolving a five-day border dispute. ‘We have saved thousands of lives. I have instructed my Trade Team to restart negotiations on Trade,’ Trump stated.