Recent price movements indicate that the Nigerian currency has remained in a consolidation phase in the unofficial market, fluctuating between N2,150 and N2,250/£/£ this month due to increased buying pressure on the British pound in Nigeria’s commercial capital.
Recent monetary fundamentals suggest that the CBN’s ongoing reforms, along with the participation of foreign investors, will be crucial in determining whether the Nigerian naira remains stable in 2025.
However, the naira experienced a positive shift with the establishment of global depositary notes denominated in naira by BNY Mellon and Standard Bank, backed by Nigerian sovereign debt. It aims to provide foreign investors with easier access to Nigeria’s high-yielding debt market.
The new depositary notes will be settled through Euroclear and Clearstream, two significant international clearing systems, enabling a broader range of institutional investors worldwide to participate. This development is seen as a major step forward.
The pound sterling remained strong against its major peers for the week. When compared to the US dollar, the sterling closed at 1.345 amid a sharp decline in May retail sales figures from the United Kingdom (UK).
However, the psychological level of 1.35 against the US dollar is a roadblock for the sterling, indicating that the short-term trend is uncertain
The poor retail sales report will exert more pressure on the Bank of England to cut rates in the summer, despite the central bank holding rates steady on Thursday.
UK retail sales dropped significantly, falling 2.7% month-over-month in May.
This came after an upwardly revised 1.3 per cent increase in April and was markedly worse than the -0.5% market estimate. This steep decline, the most significant since December 2023, was partly due to a precipitous drop in food store sales.
Notably, had there been no error in the Vehicle Excise Duty series, the April figure would have also been 3 per cent.
The core consumer price index increased by 3.5 per cent in May compared to 3.8 per cent in April. Inflation remains significantly above the Bank of England’s target of 2 per cent.
UK Finance Minister Rachel Reeves cautiously acknowledged government efforts to stabilize public finances but cautioned that there is “more to do.” Markets interpreted that as a reference to ongoing economic challenges.
The dollar’s rapid decline has also boosted the pound. Investor concerns over the potential damage from the White House’s unpredictable policymaking have caused the dollar to decline sharply.