Nigerian naira (USD/NGN): currency on edge ahead of another hike

July 24, 2023 10:00 PM PDT | By Invezz

Google News:

Nigerian naira (USD/NGN): currency on edge ahead of another hike — Image source: Invezz

Recent News

DoubleVerify Sees Update in Digital Ad Tech Sector Russell 1000

Pagaya Technologies PGY Gains Support Nasdaq Index Stocks Watch

Oceaneering International OII Sees Institutional Growth on NYSE Compos...

GAMMA Expands Stake in Valvoline Inc Amid Market Movements S&P 500

The Nigerian naira remained on edge on Tuesday morning as investors waited for the upcoming interest rate decision by the country’s central bank. The official USD/NGN exchange rate stood at ~800, a few points below the year-to-date high of 820. On the other hand, the black market rate has surged to a record high as the spread between the two widens.

The Nigerian central bank will conclude its meeting on Tuesday and deliver another interest rate hike in a bid to fight the soaring inflation. This meeting comes at a difficult time for Nigeria’s economy.

The Nigerian currency has plunged while inflation has surged to a record high. Data shows that the official exchange rate against the dollar started the year at 450. This means that Nigerians with naira savings have seen the value of their holdings tumble. The depreciating naira has also led to an indirect salary cut while inflation has led to an indirect tax.

Nigeria’s inflation has jumped. The most recent data showed that inflation has moved to above 20%. And this could worsen after the main oil and gas company boosted prices by 16% as I wrote here. In a report, Fitch warned that Nigeria’s inflation will average 25.1% this year. It said:

“These reforms will exert significant upward pressure on consumer prices in H2, 2023, with inflation set to average 25.1 per cent in 2023, the highest annual rate since the 1990s. This will further erode consumers’ purchasing power, clouding the outlook for private consumption.”

Nigerians have also seen the cost of borrowing accelerate. Interest rates jumped from 11.50% in March 2022 to 18.50%. Analysts believe that the bank will deliver another 50 basis point rate hike in its attempt to save the crashing naira.

The measures implemented by the Nigerian government will be positive in the long term. For example, letting the Nigerian naira free float will encourage international companies to the biggest economy in Africa. At the same time, ending oil subsidies will help to keep the country’s debt in check.

In the short term, however, we believe that the USD/NGN exchange rate will continue soaring as the Nigerian naira plunges. The official rate could crash to 900 in the coming months.

The post Nigerian naira (USD/NGN): currency on edge ahead of another hike appeared first on Invezz.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.