In a remarkable turn of events, the Nigerian Naira has experienced a significant rally against the US Dollar, surpassing critical resistance levels and trading below N1,000 in some segments of the black market as of late Sunday.
This surge in the Naira’s value comes in line with earlier predictions made by Goldman Sachs and coincides with heightened global geopolitical tensions.
Economists from the American investment bank, Goldman Sachs, commented that the Naira’s current bullish momentum is expected to persist, potentially driving the exchange rate below N1000 per US dollar in the coming months.
The recent upturn in the Naira follows a period of volatility marked by considerable devaluations since last June. Efforts by Nigerian financial authorities, including successive interest rate hikes now at 24.75%, and strategic foreign exchange interventions, have notably contributed to this stabilization.
During the latest Monetary Policy Committee (MPC) meeting, a spokesperson for the Central Bank of Nigeria (CBN) attributed the recovery of the Naira to the bank’s aggressive monetary policy adjustments and the implementation of new market strategies.
Additionally, geopolitical factors have played a role in market movements. The recent Iranian strike on Israel initially led to a flight to safety, bolstering the US dollar against other currencies. However, the dollar steadied after Israeli ministers indicated no immediate plans for retaliation, easing market fears to some extent.
Goldman Sachs had previously 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.
In line with efforts to attract overseas capital, Finance Minister Wale Edun unveiled plans for higher inflows of US dollars, including the sale of foreign currency bonds in the second quarter.
Despite the rallying Naira and strategies to boost economic inflows, Nigeria’s gross foreign reserves have declined. However, global commodity prices, particularly crude oil, are on the rise, with Nigeria’s oil grades currently trading at a premium over the ICE Brent benchmark. This could potentially offset the negative fiscal impacts of reduced production volumes.
Industry analysts attribute the ongoing geopolitical unrest in the Middle East to significant ripple effects on global markets, influencing commodity prices, and currency valuations.
REF: Leadership News.
