Nigerian Naira has maintained its bullish momentum despite the recent aggressive gains of the US dollar.
Gatekeepers News reports that this is due to concerns about persistent inflation, which has reinforced the belief that the Federal Reserve will postpone raising interest rates this year.
The naira rose to a four-month high of N1,120 per dollar on the black market due to high activity in Nigeria’s money market, driven by a series of foreign exchange (FX) reforms of the Central Bank of Nigeria (CBN).
These reforms have unlocked dollar liquidity, and the naira broke a key resistance level of N1200 against the greenback.
Goldman Sachs predicts that the naira has reached a “turning point” due to rate increases in Nigeria and improved capital inflows.
The CBN cleared the FX backlog of requests worth an estimated $7 billion, and in April, forbade the use of dollar collateral for naira loans, except government Eurobonds and foreign bank guarantees.
The CBN also evaluated the exchange rate for these operators, bringing it down from N1,251/$1 to N1,101 per dollar.
Total inflows into the NAFEM jumped by 41.7% to $3.75 billion from $2.64 billion in February, the highest amount since March 2019.
Nigeria’s central bank raised the benchmark interest rate this year by 600 basis points to 24.75% since February to combat rising inflation.
Despite the hawkish narrative of the US Fed and the recent emphasis on the need for a cautious approach to loosening monetary policy, the naira has ignored it.
Meanwhile, the US dollar had earlier declined but has since recovered following the Producer Pricing Index (PPI) announcement.
The PPI increased 0.2% month over month in March, contrary to the 0.3% increase that economists had predicted.
It increased 2.1% year over year as opposed to an anticipated 2.2% gain.
