Naira Set to Break N1,445/$ as Fed Rate Cut Expectations Boost Nigerian Currency
The Nigerian Naira has maintained relative stability against the US dollar in the official market, even as expectations build for a key policy move by the US Federal Reserve. Analysts now predict that the currency could break through the N1,445/$ level this week, supported by signals that the Fed may cut interest rates in December. Last week, the Naira saw a slight depreciation of 0.2%, opening at N1,446/$ and closing at N1,449/$.
The potential boost for the Naira comes as dovish US monetary policy makes dollar-denominated assets less attractive to global investors. Lower US interest rates reduce yields on American investments, prompting capital to flow into higher-yielding emerging markets like Nigeria. This trend has already contributed to a year-to-date Naira appreciation of roughly 5.7% against the US dollar.
A weaker US dollar also carries broader benefits for Nigeria’s economy. It can help lower the cost of imports such as machinery and fuel, ease inflationary pressures, and increase consumer spending. Furthermore, higher foreign inflows into Nigerian government bonds and equities support the Naira’s reserves and provide a cushion against volatility in the parallel market.
Financial analysts note that recent policy moves by the Central Bank of Nigeria (CBN), including a modest domestic rate cut, are supported by these global trends. The combination of a weaker greenback, manageable global interest rate differentials, and rising oil prices enhances Nigeria’s foreign exchange reserves, providing further stability to the Naira.
Market sentiment is reflected in the US Dollar Index (DXY), which recently traded lower at 98.9 amid growing expectations of a Fed rate cut. According to the CME FedWatch Tool, the probability of a December reduction now stands at nearly 90%, up from 71% last week. Investors are closely watching Fed Chair Jerome Powell’s announcements, with major banks like JPMorgan, Morgan Stanley, and Bank of America revising their forecasts to anticipate a quarter-percentage point cut this month.
source: nairametrics