Naira Falls on Weak Inflation Report, CBN Policy Direction

Naira Declines on Weaker than Expected Inflation Report

The Naira declined on Wednesday against the United States dollar after a report by the National Bureau of Statistics shows the inflation rate surged to 12.40 percent in Africa’s most populous nation, Nigeria.

Nigerian Naira slid from N452 it exchanged to a US dollar earlier on Wednesday to N453 on the black market after the report was made public later in the day.

The local currency appreciated against the British pound by N3 to N550, better than the N553 it traded earlier on Wednesday.

Against the Euro single currency, the Nigerian Naira remained flat at N490, the same rate it was exchanged earlier on Wednesday.

On the nation’s Investors and Exporters’ Forex Window, the Naira was exchanged at N386 to a US dollar on Wednesday, the same rate it was traded on Tuesday but opened at N368.63 against the greenback on Thursday. A 0.6 percent decline from Wednesday close.

However, the local currency slid as low as N400 against the US dollar on the I&E FX window before pulling back to close at N386 on Wednesday. That was largely due to the inflation report released during the day.

A turnover of $16.06 million was registered on Wednesday, up from $15.31 million recorded on Tuesday, according to the FMDQ Group data released on Thursday morning.

The local currency declined after data shows the nation’s consumer prices are not slowing down any time soon and further highlighted the possibility of a decline in consumer spending and economic activities in the second half of the year.

This, coupled with the report that the Central Bank of Nigeria is planning to converge the nation’s exchange rate to one single rate across forex segments, created panic and likely triggers hoarding across forex markets.