The USD to NGN exchange rate is currently experiencing significant fluctuations, trading at 90-day lows around 1438 NGN per USD. This position is approximately 3.7% below its three-month average of 1493 NGN, indicating a relatively stable trading range of 7% from 1438 to 1539 NGN in recent weeks. Analysts suggest that the recent softening of the USD is a response to market corrections, particularly a cooling off from the prior aggressive adjustments in Federal Reserve interest rate expectations, alongside concerns about a potential US government shutdown.
Market speculation regarding upcoming US inflation data and the effects of US-China trade negotiations are expected to keep the USD responsive to broader market trends in the absence of significant domestic data releases. Furthermore, the implications of recent leadership discussions at the Federal Reserve, particularly regarding its role beyond monetary policy, could influence future USD movements.
On the other hand, the Nigerian Naira is under pressure due to a variety of economic factors. Despite a decline in inflation to 18.02%—the lowest level in over three years—there are concerns that the NGN may continue to depreciate. This depreciation is attributed to foreign investors divesting from local assets amid global economic uncertainties and a constrained dollar supply from the Central Bank of Nigeria. The recent reduction in the benchmark interest rate by the Central Bank reflects an effort to combat declining demand but could distance investors amid continued currency volatility.
Recent reports indicate that the global oil price, which plays a critical role in Nigeria's economic stability, is also on a downward trend, trading near 63.38 USD per barrel, significantly below its three-month average of 65.89 USD. This trend could further complicate the NGN's outlook as lower oil prices traditionally mean reduced revenue for Nigeria, influencing its currency performance.
In summary, factors such as the Federal Reserve's policy approach, the anticipated US inflation data, ongoing trade negotiations, and Nigeria's easing inflation paired with pressure from a declining oil market collectively shape the current dynamics of the USD to NGN exchange rate. Caution is advised as both currencies navigate through these turbulent economic landscapes.
