The naira enters the new trading week with a modest gain against the dollar, closing Friday at ₦1,329.51/$ amid increased activity in Nigeria’s official foreign exchange market, following the Central Bank of Nigeria’s (CBN) decision to slash its benchmark interest rate by 350 basis points to 23 per cent.
The closing rate represented an improvement of ₦1.69 from the ₦1,331.20 opening benchmark reported for the week. However, the currency surrendered part of its earlier gains over three consecutive sessions, showing that its recovery remained limited.
The performance coincided with the CBN’s Monetary Policy Committee (MPC) reducing the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent on Tuesday, September 22. Speaking after the meeting in Abuja, CBN Governor Olayemi Cardoso explained that the adjustment sought to bring the policy rate closer to prevailing market rates and improve the effectiveness of monetary policy, as reported by Premium Times.
CBN Rate Cut and Naira Response
Lower interest rates can reduce the attraction of local currency investments by lowering potential returns. However, the naira’s immediate response showed that the announcement did not trigger a sharp depreciation during the trading sessions covered.
Trading activity strengthened in the Nigerian Foreign Exchange Market (NFEM), with turnover reaching approximately $2.25 billion between Monday and Thursday. This compared with $2.07 billion over the corresponding four days of the preceding week, representing a reported increase of 8.9 per cent.
The number of transactions also rose from 1,183 to 1,351, an increase of 168 deals, or 14.2 per cent. The comparison covers matching four-day periods, rather than two complete trading weeks, as reported by Leadership.
Forex Turnover and Trading Activity
Turnover measures the value of transactions completed in the market. Higher turnover indicates increased trading activity, although it does not, on its own, establish that foreign investment inflows increased.
Wednesday delivered the highest turnover within the Monday-to-Thursday period, with transactions worth $732.45 million completed across 389 deals. This exceeded Tuesday’s $694.58 million from 367 deals. On Monday, before the policy announcement, turnover stood at $335.51 million across 290 transactions.
Wednesday’s turnover was therefore more than twice Monday’s level, highlighting the increased activity around the policy decision. The timing does not establish that the rate cut alone caused the increase, since trading volumes also reflect other market conditions.
Naira's Weekly Performance and Outlook
The naira closed Monday at ₦1,329.80 per dollar before strengthening by ₦2.02 to ₦1,327.78 on Tuesday. It subsequently weakened to ₦1,328.50 on Wednesday and ₦1,328.67 on Thursday, before ending Friday at ₦1,329.51.
Despite those successive declines, the currency finished stronger than the reported opening benchmark, leaving it with a small overall improvement. For businesses budgeting for dollar payments, the closing rate provides a reference point, although actual transaction costs depend on the applicable rate and charges.
As trading resumes, the key question is whether stronger market activity will accompany sustained currency stability, after a week in which the naira held its ground but struggled to retain its strongest gains. The naira’s performance comes amid broader economic developments, including Nigeria’s gross external reserves climbing above $54.72 billion, providing additional support for the local currency amid sustained foreign exchange inflows.
