The GBP to NGN exchange rate has shown notable variations in recent weeks, with the pound achieving a modest gain despite disappointing retail sales in the UK and reduced expectations of an interest rate cut by the Bank of England (BoE). As of this update, the GBP is trading near recent highs around 2100 NGN, maintaining its 3-month average and displaying volatility within a 9.6% range, from 1970 to 2160 NGN.
Analysts have observed that the pound's performance is heavily influenced by domestic economic indicators, including inflation, employment data, and GDP growth. The recent dip in UK retail sales, down 2.7% in May, raises concerns about the momentum of economic recovery, particularly ahead of key services sector PMIs for June. Geopolitical tensions and uncertainties surrounding UK trade relations, particularly in light of US tariffs imposed on UK goods during the ongoing trade disputes, could further pressure the pound.
In Nigeria, the naira's value continues to be shaped by significant economic reforms and external pressures. Despite the Central Bank of Nigeria (CBN) having allowed greater flexibility in the naira’s exchange rate, the currency is still impacted by high inflation, which has surpassed 23%. Recent government initiatives, such as cracking down on currency-related practices and seeking external borrowing for economic support, may play a role in shaping investor sentiment towards the naira.
Additionally, Nigeria's economic stability remains tied to developments in the global oil market. With oil prices recently trading at 71.48 USD, about 6.2% above their 3-month average, fluctuations in oil prices significantly affect the NGN due to Nigeria’s dependency on oil revenue. The volatility in oil prices, with a range of 31.1% from 60.14 to 78.85 USD, will continue to influence the naira's overall stability.
The outlook for the GBP/NGN exchange rate remains uncertain. Economic trends in both countries, combined with geopolitical factors and global market sentiments, will significantly determine future movements. Investors are advised to remain vigilant, keeping an eye on any policy changes from the BoE, the economic reforms proposed by the Nigerian government, and international commodity prices, particularly oil.