Naira closes at ₦1,329.51/$ as CBN cuts benchmark rate to 23%

The naira ended last week at ₦1,329.51 per dollar in the official foreign exchange market, a modest gain of ₦1.69 from the ₦1,331.20 opening benchmark. The close followed increased activity in the market, but the currency gave up part of its earlier gains over three consecutive sessions.

The Central Bank of Nigeria cut its benchmark interest rate during the week, a move that raised questions about demand for naira assets.

CBN cuts MPR by 350 basis points

The Monetary Policy Committee reduced the Monetary Policy Rate by 350 basis points, from 26.5 per cent to 23 per cent, on Tuesday, September 22. CBN Governor Olayemi Cardoso explained after the meeting in Abuja that the adjustment sought to bring the policy rate closer to prevailing market rates and improve the effectiveness of monetary policy, a Premium Times report stated.

Lower interest rates can reduce the attraction of local currency investments by lowering potential returns. The naira’s immediate response, however, showed the announcement did not trigger a sharp depreciation during the trading sessions covered.

Turnover rises 8.9% to $2.25 billion

Trading activity strengthened in the Nigerian Foreign Exchange Market, with turnover reaching approximately $2.25 billion between Monday and Thursday. That compared with $2.07 billion over the corresponding four days of the preceding week, an increase of 8.9 per cent.

The number of transactions rose from 1,183 to 1,351, an increase of 168 deals, or 14.2 per cent. The comparison covers matching four-day periods, not two complete trading weeks, Leadership reported.

Turnover measures the value of transactions completed in the market. Higher turnover indicates increased trading activity, although it does not, on its own, establish that foreign investment inflows increased.

Wednesday delivered the highest turnover within the Monday-to-Thursday period, with transactions worth $732.45 million completed across 389 deals. This exceeded Tuesday’s $694.58 million from 367 deals. On Monday, before the policy announcement, turnover stood at $335.51 million across 290 transactions. Wednesday’s turnover was therefore more than twice Monday’s level.

The timing does not establish that the rate cut alone caused the increase, since trading volumes also reflect other market conditions.

Daily moves and what it means

The naira closed Monday at ₦1,329.80 per dollar before strengthening by ₦2.02 to ₦1,327.78 on Tuesday. It weakened to ₦1,328.50 on Wednesday and ₦1,328.67 on Thursday, before ending Friday at ₦1,329.51.

Despite those successive declines, the currency finished stronger than the reported opening benchmark, leaving it with a small overall improvement. For businesses budgeting for dollar payments, the closing rate provides a reference point, although actual transaction costs depend on the applicable rate and charges.

As trading resumes, the key question is whether stronger market activity will accompany sustained currency stability, after a week in which the naira held its ground but struggled to retain its strongest gains.

Earlier, the naira returned to positive territory on Monday, September 21, strengthening against the United States dollar in both the official and parallel foreign exchange markets after a difficult trading week. The recovery came as Nigeria’s gross external reserves climbed above $54.72 billion, providing additional support for the local currency amid sustained foreign exchange inflows.