The naira, the Nigerian currency, strengthened against the US dollar on Wednesday, defying the country’s rising inflation rate. According to FMDQ, the naira closed at N818/$1 on Wednesday, compared to N850.22/$1 on Tuesday. This means that the naira gained N31.23 against the dollar in one day.
However, the naira remained stable at the parallel market, where it traded at N1120/$1 on Wednesday, the same rate as the previous day. As of Thursday morning, the naira was slightly up to N1140/$1 at the parallel market.
The naira’s performance came as the National Bureau of Statistics (NBS) released its latest Consumer Price Index (CPI) data, which showed that the inflation rate in Nigeria rose to 27.33 per cent in October from 26.72 per cent in September. This is the highest inflation rate in Nigeria in 20 years.
The NBS attributed the increase in inflation to the rise in food prices, which was caused by factors such as insecurity, flooding, and the border closure. The food inflation rate rose to 32.99 per cent in October from 32.13 per cent in September.
The naira’s appreciation against the dollar may be due to the increased supply of foreign exchange by the Central Bank of Nigeria (CBN) and the International Monetary Fund (IMF).
The CBN has been injecting dollars into the market to ease the pressure on the naira and support the economy. The IMF also approved a $3.4 billion emergency loan to Nigeria in April to help the country cope with the impact of the COVID-19 pandemic.
The naira’s stability at the parallel market may also reflect the reduced demand for dollars by importers and travellers, who have been affected by the lockdown and travel restrictions imposed by the government to contain the spread of the coronavirus.
The naira’s exchange rate is one of the key indicators of the health of the Nigerian economy, which is dependent on oil exports for foreign exchange earnings.
The naira’s value affects the prices of goods and services, the cost of living, and the purchasing power of the citizens. The naira’s strength or weakness also influences the confidence of investors and the attractiveness of the country as a destination for foreign direct investment.