The value of the naira declined considerably on Tuesday on the P2P and physical black markets, notwithstanding the infusion of foreign exchange liquidity at the official market and the considerable clearing of foreign exchange backlogs by Nigeria’s top bank.
The naira traded at around N1230/$ in the early hours of Tuesday on the P2P market, an illegal market frequently traded by crypto traders, retail investors, and speculators, up from N1220/$ on Monday.
Furthermore, on Tuesday, the physical black market buy rate for a dollar to naira was at N1,245 versus the greenback.
Recently, the CBN claimed that it paid approximately $2 billion in outstanding foreign exchange forwards in the last three months to clear a backlog of dollars, but currency traders in the unofficial market are now unresponsive to such news.
The Naira, on the other hand, gained ground against the US dollar in the official foreign currency market on Monday. According to FMDQ data, the Naira rose against the US dollar, rising from N869.13 to N856.57 per dollar at the close of business on Friday. Comparing the local currency to the N869.13 per dollar it closed on Friday, this indicates a 1.45% rise in the country’s traditional market.
The US dollar index which is used to evaluate the strength of major currencies, remained within its range ahead of crucial inflation data, which is expected to provide more market advice on the US Federal Reserve’s monetary policy for this year.
As investors continued to process the conflicting U.S. economic data from last week and eyed important inflation readings for new signals regarding when the Federal Reserve is likely to start lowering interest rates, currency speculators held onto their hold on the safe haven currency on the international scene.
Price action highlights the market’s mixed feelings. This is because currency speculators are betting on the US dollar as a result of escalating geopolitical tensions in the Middle East, as demonstrated by the Red Sea and Chinese weapons that Israel has discovered in Hamas storage facilities.
Speculators, on the other hand, saw last Friday’s collapse in ISM data as evidence for the Fed to decrease interest rates rapidly. For the time being, markets anticipate geopolitics to take center stage as new reports show escalating tensions.
