Naira Firms As Forex Turnover Rises 9% After CBN Rate Cut

By BUKOLA ARO-LAMBO and DEBORAH BELLO

The value of the naira firmed against the dollar last week following the reset of the monetary policy rates by the Central Bank of Nigeria (CBN) from 26.5 per cent to 23 per cent to meet market realities as the turnover rose.

Total forex turnover on the NFEM from Monday to Thursday this week stood at about $2.25 billion, up 8.9 per cent from $2.07 billion recorded over the same four days last week. The number of deals also increased to 1,351 from 1,183, representing a 14.2 per cent rise.

The increase came after the CBN’s Monetary Policy Committee cut the Monetary Policy Rate (MPR) by 350 basis points to 23 per cent from 26.5 per cent on Tuesday, September 22. CBN Governor Olayemi Cardoso said, at a briefing in Abuja after the meeting, that the move was aimed at bringing the policy rate closer to the rates already seen in the market.

Trading in the local currency at the NFEM was highest on Wednesday, a day after the rate cut was announced, with turnover reaching $732.45 million from 389 deals. This compared with $694.58 million from 367 deals on Tuesday and $335.51 million from 290 deals on Monday, before the announcement.

At the end of the week, the value of the naira firmed slightly by 0.12 per cent from N1,331.20 which began the week to close at N1,329.51 to the dollar. The naira firmed against the dollar on Tuesday, strengthening by N2.02 to N1,327.78 per dollar from N1,329.80 which it closed on Monday. The gain came despite expectations that lower interest rates could reduce the return on naira assets and put pressure on the currency.

The naira, however, gave up some of the gain in the following sessions, weakening to N1,328.50 on Wednesday and N1,328.67 on Thursday before closing at N1,329.51 on Friday.