The naira to pound exchange rate in Nigeria remained relatively strong at the mid-week trading session, with the local currency holding around ₦1,762 to £1 in the official foreign exchange market despite the Central Bank of Nigeria’s recent interest-rate cut. The latest movement highlights the naira’s continued resilience against the British pound as liquidity conditions in Nigeria’s foreign exchange market improve.
The pound has also lost ground against the naira in recent weeks, falling from levels close to ₦1,800/£ in early September to the mid-₦1,700 range. At the beginning of the year, the pair traded near ₦1,948/£, showing how significantly the exchange rate has shifted over the period. The movement reflects changing market conditions and the influence of both Nigerian and global economic factors on the GBP/NGN pair.
Ordinarily, a reduction in interest rates can put pressure on a country’s currency by making local assets less attractive to some foreign investors. However, the naira’s recent performance has bucked that expectation. Nigeria’s external reserves, reported at about $55 billion, alongside stronger foreign-exchange liquidity and increased spot-market activity, have provided additional support for the currency and helped reduce pressure in the official FX market.
Oil-related dollar inflows have also remained important to Nigeria’s foreign-exchange position. As a major crude-oil exporter, Nigeria relies heavily on oil revenues to generate foreign currency, meaning movements in crude production and international oil prices can directly affect the supply of dollars in the domestic market. Meanwhile, the CBN has continued to combine monetary easing with other measures aimed at maintaining FX-market stability, including liquidity management and efforts to improve transparency in the foreign-exchange market.
For businesses, investors and Nigerians who regularly transact in pounds, the ₦1,762/£ rate provides another indication of the changing dynamics in Nigeria’s currency market. While the naira’s recent strength offers some relief against the pound, the exchange rate remains sensitive to foreign-exchange liquidity, oil revenues, capital flows, monetary policy and global currency movements. Market participants will therefore be watching the CBN’s next moves and developments in Nigeria’s external sector for signs of whether the current stability can be sustained.
source: nairametrics