Naira drops 5.6% against dollar in May in official market

The Nigerian currency ended the month weaker, despite a monthly decline in the dollar index.

Data from the FMDQ revealed that the naira posted a monthly loss of more than five per cent against the haven currency, settling at N1,485.99 against the greenback on Friday, weaker than the N1,402.67/$ quoted at the beginning of last month.

On a day-to-day trading basis, the local currency closed flat at 0.08 per cent as the dollar exchanged at N1,485.99 on Friday compared to N1,484.75 quoted on Thursday at NAFEM.

Despite improved liquidity and the apex bank’s efforts to impose various restrictions on BDC activities, such as street trading, international outward transfers, and prohibition of the local currency’s presence on virtual P2P trading platforms, the naira has still been under tremendous pressure in the country’s fragile foreign exchange market.

In May, the total amount of dollars offered by willing vendors and buyers reached $4.60 billion.

According to FMDQ’s daily market summary, the intraday high ended the month at N1,550 per dollar, higher than N1,445 at the start of the month. In contrast to the initial quote of N1,299.42 per dollar at the beginning of the month, the intraday low finished at a firmer N1,174.88/$1.

Dollar Index posted its first monthly loss in 2024

U.S. inflation increased in April as anticipated, raising doubts about when the U.S. Federal Reserve will be able to lower interest rates. The dollar fell on Friday, posting its first monthly decline in 2024.

The Bureau of Economic Analysis of the Commerce Department reported on Friday that the price index for personal consumption expenditures (PCEs) rose by 0.3% in March, consistent with the unrevised gain in the previous month.

Since March 2022, the Fed has increased borrowing costs by 525 basis points to weaken demand in the world’s largest economy. The first-rate cut was originally anticipated by financial markets to occur in March but was postponed to June and is currently scheduled for September.

Following lower revisions to consumer spending, the prior estimate of 1.6% annualized growth for the U.S. economy from January through March was revised down to 1.3%, according to official data released on Thursday.

After April’s hints of U.S. inflation stabilization, Treasury yields declined, which some saw as a warning that the Fed would still decide to lower rates later this year.

The yield on the benchmark 10-year U.S. note dropped by 5.1 basis points to 4.503% late on Thursday, from 4.554%, and the yield on the 30-year bond dropped by 3.4 basis points to 4.6511% from 4.685%.

The yield on the 2-year note, which normally follows forecasts for interest rates, dropped 5.2 basis points to 4.8768% late on Thursday from 4.929%.