Naira Surges Against Dollar, Hits 5-month High (2024)

The Naira experienced a significant rally against the US Dollar, breaking through critical resistance levels to trade below N1,000 in some segments of the black market as of late Sunday.

This performance aligns with earlier predictions by Goldman Sachs and comes amid heightened global geopolitical tensions.

“The Naira’s current bullish momentum is projected to persist, potentially pushing the exchange rate below N1000 per US dollar in the upcoming months,” economists from the American investment bank, Goldman Sachs, commented.

This upturn in the Naira’s value follows a period of volatility where it suffered considerable devaluations since last June. Efforts by Nigerian financial authorities, including successive interest rate hikes now pegged at 24.75%, and strategic foreign exchange interventions have notably contributed to this stabilization.

“The Central Bank of Nigeria’s (CBN) aggressive monetary policy adjustments and the implementation of new market strategies have been central to the recovery of the Naira from its prior losses,” a CBN spokesperson stated during the latest Monetary Policy Committee (MPC) meeting.

Additionally, the geopolitical landscape has influenced market movements. The recent Iranian strike on Israel spurred a flight to safety, which bolstered the US dollar against other currencies.
However, the dollar steadied after initial gains, with Israeli ministers indicating no immediate plans for retaliation, which somewhat eased market fears.

Goldman Sachs had earlier adjusted its forecast in March, predicting that the Naira would strengthen to N1200 per dollar by 2024. The firm cited increased capital inflows and a series of policy initiatives aimed at bringing stability to the foreign exchange market as key drivers behind this optimistic outlook.

Finance Minister Wale Edun also unveiled plans for higher inflows of US dollars, including the sale of foreign currency bonds in the second quarter. This move is part of broader efforts to attract overseas capital with high-yield short-term debt products.

Despite the rallying Naira and strategies to boost economic inflows, Nigeria’s gross foreign reserves have declined, even as global commodity prices, particularly crude oil, continue to rise. Nigeria’s oil grades are currently trading at a premium over the ICE Brent benchmark, which could potentially offset the negative fiscal impacts of reduced production volumes.

“The ongoing geopolitical unrest in the Middle East and the anticipation of further instability have had significant ripple effects on global markets, influencing commodity prices and currency valuations alike,” explained an industry analyst.