Naira Sinks Against Dollar as Nigeria’s Central Bank Raises Interest Rates
In a move that has sent shockwaves through foreign exchange markets, the naira has taken a beating against the US dollar. The latest interest rate hike by the Central Bank of Nigeria (CBN) has triggered a nosedive in the value of the currency.
According to reports from Wuse Zone 4 in Abuja, Bureau De Change operator Dayyabu Ashiru told Media Talk Africa that the naira exchanged for N1,590 per dollar on Tuesday, a decline from N1,570 the previous day. Ashiru explained that his operators buy the dollar at N1,580 per dollar and sell at N1,590, resulting in a N20 loss.
The depreciation was not limited to the black market. The official foreign exchange market also saw a significant drop in the naira’s value, with FMDQ data showing that the currency depreciated to N1,548.76 per dollar on Tuesday from N1,500.32 exchanged on Monday. This represents a N48.44 loss against the dollar.
Despite the CBN’s efforts to stabilize the market, the currency took a hit. The bank had sold $106.5 million in foreign currency to authorized dealers last Wednesday and Thursday, but it appears that this move had little impact on the market.
The interest rate hike to 26.75 per cent, implemented on Tuesday from 26.25 per cent in May, has been cited as a key factor behind the naira’s depreciation. The move is aimed at tackling high inflation and stabilizing the economy, but its effects on the currency market have been negative.
The naira’s weakness is likely to have significant implications for Nigerian businesses and individuals who rely on the currency for imports and other transactions. The country’s economy has been grappling with challenges, including high inflation and a declining currency, and the latest development is unlikely to provide relief.
As the situation unfolds, it remains to be seen how the CBN will respond to the naira’s depreciation. The bank has a reputation for taking measures to stabilize the currency, but its recent moves have been met with mixed results.
