Business

Naira holds below N1600/$ mark amid holiday-led slowdown, renewed market optimism

Published

1 week ago

June 10, 2025

Spread The News

The Nigerian naira held firm against the U.S. dollar in the parallel market on Tuesday, trading within the N1587–N1590 per dollar range, staying below the critical N1600/$ resistance level.

The development comes amid reduced transactional activity during the just-concluded Eid el-Kabir holidays and growing investor confidence in Nigeria’s economic direction.

Currency traders across Lagos, Nigeria’s commercial capital, reported thin volumes early Tuesday as market activities gradually resumed following the national holiday.

Despite the slowdown, the naira’s resilience signals renewed optimism fueled by recent macroeconomic data and Central Bank of Nigeria (CBN) reforms.

According to the CBN, business sentiment in Africa’s largest economy has turned notably positive, with local firms anticipating stable growth and increased hiring in the second half of 2025.

The agriculture sector led the optimism, scoring the highest confidence index, while players in manufacturing, power, and services expressed bold expansion plans.

Analysts say these expectations are supporting the naira’s performance, as demand-side pressure remains contained for now.

Veteran economist Bismarck Rewane, CEO of Financial Derivatives Company, weighed in at the June edition of the Lagos Business School breakfast meeting, forecasting that the naira will likely trade between N1600 and N1650 per dollar in the coming weeks.

“The naira is still undervalued by about 26.82% using conventional valuation models,” Rewane said. “That offers some cushion, especially as the dollar itself has weakened by nearly 9% this year.”

Rewane also pointed out a significant development: the spread between official and parallel market rates has tightened dramatically to just 1–3%, a far cry from the 50–70% disparity seen before recent policy interventions. “With a ₦50 margin at most, you can now say the naira is priced,” he added.

Global Context: Dollar Faces Pressure Amid U.S.–China Talks and Inflation Watch

Globally, the U.S. dollar remains stable but subdued, with the Dollar Index hovering at 98.99, not far from its recent six-week low.

The greenback has lost approximately 9% year-to-date, reflecting investor caution ahead of the U.S. consumer price index (CPI) report due Wednesday. Market participants hope the data will offer insights into inflationary trends amid ongoing trade tensions.

Meanwhile, geopolitical negotiations between Washington and Beijing continued in London, with top envoys discussing issues like microchip exports, rare earth access, and educational visas. While reminiscent of the Geneva truce that previously eased tariff tensions, analysts say these talks face tougher obstacles, making quick wins less likely.

Dean Turner, an economist at UBS in London, warned investors in a Monday note that the U.S. is fast becoming “the epicenter of global uncertainty,” driven by political instability, volatile trade policy, and widening fiscal deficits.

Still, he stopped short of advising investors to fully abandon dollar-denominated assets, citing the U.S. market’s unmatched scale and liquidity.

“The dollar’s perch is wobbling, not collapsing,” Turner remarked. “But when you combine fragile trade diplomacy with domestic political noise, it’s clear the greenback will face more resistance in the months ahead.”

Back home, while the naira’s current stability has been welcomed by traders and policy watchers alike, analysts caution that long-term sustainability depends on structural reforms, oil revenue stability, and continued foreign inflow.

For now, market sentiment leans positive, buoyed by tightening spreads, stronger business confidence, and reduced arbitrage opportunities.

But with global uncertainties still looming and domestic challenges unresolved, the naira’s position below the ₦1600/$ mark could prove both a psychological and economic battleground in the weeks ahead.