The Nigeria Naira surged to a five-week high against the dollar during Wednesday’s intraday trading session. This rise came just a day after the central bank implemented measures to combat inflation and removed restrictions on foreign investors participating in its fixed-income auctions.
According to data from LSEG, the official market saw the currency strengthen to 1,200 per dollar, surpassing levels observed in the parallel market which hovered around 1,340.
Nigeria, the largest economy in Africa, has been contending with dollar shortages, leading to a record low of 1,851 per dollar last month. Central bank Governor Olayemi Cardoso noted an improvement in dollar liquidity despite these challenges.
In a significant move last week, Nigeria’s central bank announced the clearance of its verified foreign exchange backlog. This action aligns with its overarching strategy to stabilize the naira and curb inflationary pressures.
Moreover, the central bank opted to raise its monetary policy rate by 200 basis points to 24.75%, up from 22.75%, marking one of the largest hikes in approximately 17 years. This decision reflects the bank’s commitment to addressing inflationary concerns head-on.
During the most recent auction, investors anticipated higher yields, with expectations of rates surpassing secondary market quotes. For instance, the one-year Treasury bill fetched 26.6% at the previous auction, but investors predicted a rise above the secondary market’s approximately 22.75%. Similarly, the benchmark 10-year note hovered around 20.6% in the secondary market.