Naira is struggling in the official market, the US dollar index is showing recovery

The Nigerian currency devalued slightly on the official market after the US dollar index showed some recovery following Wednesday’s sell-off.

The Naira depreciated slightly against the US dollar in the official foreign exchange market on Wednesday, October 30, 2024.

The Nigerian Autonomous Currency Market reported that the local currency was worth N1,631.17/$1 at the official counter.

Nigeria’s foreign exchange is under pressure due to its large money supply and high budget deficit.

The Nigerian money supply, also known as M3, grew to N109 trillion as of September 2024. According to CBN data, M3 grew at an annual rate of 62.8 percent, compared to N66.94 trillion in September 2023.

The CBN and the International Finance Corporation (IFC) have signed an agreement to reduce foreign exchange risks and increase local currency lending for Nigerian companies, IFC said in a statement on Monday.

The IFC, a member of the World Bank Group, plans to significantly increase its financing in Nigeria, with a target of more than $1 billion in the coming years, the statement said.

IFC will manage currency risks and expand its naira investments in small and medium businesses, creative industries, infrastructure, housing, agriculture and energy.

“Many of these sectors require local currency financing, and IFC’s partnership with the central bank is a critical tool to expand access to this financing,” the statement stated.

The US dollar shows recovery during Thursday’s trading session

The dollar index rallied again after plunging late yesterday in response to a mixed bag of US reports.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six other currencies, fell on Wednesday after the release of conflicting economic data. The market reacted in October to the September ADP Employment Change report, but a negative revision to third-quarter GDP growth sent the USD into a tailspin.

The US ADP Employment Change outperformed expectations in October, rising 233,000, which should limit dollar losses. US GDP grew 2.8% in the third quarter, better than its global counterparts but less than the market had forecast.

Investors remain on edge ahead of Friday’s Nonfarm Payrolls (NFP) report, which could shed more light on labor market fundamentals. After falling below the level of 104 index points a day earlier, the dollar index, which measures the US dollar against a basket of foreign currencies, is now up 0.15% to 104.02.

Two of the basket currencies, the euro and British pound, fell almost 0.2% to $1.0871 and $1.2953 respectively.