The Nigerian naira had a marginal negative start to the week, trading at 1,533.67/$ on the Nigerian Foreign Exchange Market, down 0.08% from 1,532.51/$ on Friday.
The exchange rate reached an intraday high of 1,535/$, while its lowest point for the day was 1,532/$.
It settled at 1,543/$ on the parallel market, which was higher than the previous week’s average of 1,545/$.
Nigeria shows favorable economic outlook
The Central Bank of Nigeria’s ongoing interventions and improved foreign exchange inflows were expected to support the naira’s largely steady trading during this week’s official window.
Recent market action showed the local currency is likely to remain stable, barring significant shocks to global markets with sporadic pressure from external sources.
However, a stronger US dollar posed challenges for the Nigerian naira, and declining crude prices could limit future gains.
The International Monetary Fund (IMF) welcomed the CBN’s efforts to enhance financial inclusion and promote capital market growth, while emphasizing the need to adopt robust, risk-based supervision for mortgage, consumer lending, fintech, and crypto sectors.
The bolstering of Nigeria’s foreign exchange reserves, rising market confidence, and ongoing naira’s stability amid the CBN’s strategic efforts for the domestic economy.
Nigeria’s uptick in oil production also boosted the naira’s outlook. OPEC data showed Nigeria’s average daily crude production increased to 1.5 million barrels per day in July. This is an increase of 7,000 barrels per day over the OPEC-approved quota for Africa’s largest oil producer.
The nation has maintained its crude production above the OPEC quota for the second consecutive month. Crude production rose slightly by 2,000 barrels per day from 1,505 million barrels per day in June to 1.507 million barrels per day in July, according to the OPEC Monthly Oil Market Report. The nation’s average crude production reached the OPEC quota for the third time this year in January, June, and July.
Nigeria’s highest output was in January, pegged at 1.54 million barrels per day. In February, crude production fell to 1.46 million barrels per day. March saw a decline to 1.4 million barrels per day as it deteriorated. The output increased once more to 1.48 million barrels per day in April before declining to 1.45 million barrels per day in May.
Meanwhile, the Nigerian Apex Bank urged Nigerians to report any bank, deposit bank, or its employees engaged in the illicit new currency trade to help stop the hawking or selling of new naira notes at social events and parties.
According to the CBN, hawkers and sellers would not engage in the illegal banknote trade if deposit commercial banks did not provide insider suppliers, indicating insider involvement in the nation’s banknote transactions.
Paul Onuoha, head of Currency Operations and Branch Management, urged the public to exercise caution and notify the CBN or security agencies of any commercial bank employees or officials giving new naira notes to vendors or hawkers.
U.S dollar begin the week bullish
The US Dollar Index (DXY), which measures US dollar (USD) strength against six major currencies, settled above 98 points. The Greenback continues to strengthen as US President Donald Trump announced he would begin preparations for a trilateral meeting with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy.
President Trump highlighted that Putin had agreed Russia might consider security guarantees and that discussions were needed on possible territorial exchanges. President Zelenskyy, who emphasized the need for genuine peace and US involvement in security guarantees, stated that a ceasefire is not currently in place.
Zelenskyy also confirmed major U.S. arms purchases. On Tuesday, US Secretary of State Marco Rubio said he would work with European allies and non-European countries to secure security guarantees for Ukraine.
However, the haven currency face challenges as the dovish tone surrounding the US Federal Reserve’s (Fed) policy outlook persists, despite better- than- expected US producer inflation and retail sales data. Markets are pricing in an 84 percent chance of a 25-basis point Fed rate cut in September, according to CME’s FedWatch tool.
Traders await the Fed Chair Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium later this week to gauge the Fed’s September policy outlook. Markets will Jerome Powell’s speech from Jackson Hole on Friday morning. The event, titled “The Davos for central bankers,” is hosted by the Federal Reserve Bank of Kansas City and begins this Thursday.
The theme this year is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy. “ Markets are expected to be significantly impacted shortly by Powell’s comments, whether they are interpreted as cautious or dovish regarding rate cuts.