The naira traded around ₦1,778 to the British pound as stronger-than-expected UK inflation data boosted sterling against the US dollar in midweek trading.
The exchange rate remained within a relatively narrow range over the past month, although market data showed the pound-naira pair fluctuating between ₦1,749 and ₦1,841 over the preceding 90 days.
The latest movement followed the release of UK inflation figures showing that the annual consumer price inflation rate rose to 3.5 per cent in September, above the 3.4 per cent forecast and August’s 3.1 per cent.
Core inflation, which excludes food, energy, alcohol and tobacco, also increased to 2.8 per cent year-on-year, compared with the 2.7 per cent forecast.
The higher-than-expected inflation figures strengthened market expectations that the Bank of England could maintain a tighter monetary policy, with traders anticipating a possible 0.25 percentage-point interest rate increase in November.
Sterling traded around $1.34 against the US dollar during Wednesday’s European session, supported by expectations of tighter monetary policy in the United Kingdom.
Meanwhile, the US dollar faced selling pressure amid market speculation over the Federal Reserve’s next interest rate decision and concerns surrounding the outlook for US artificial intelligence-driven growth.
Nigeria’s forex market outlook
Nigeria’s foreign exchange market has experienced a period of relative stability, with the Central Bank of Nigeria maintaining a tight monetary policy stance to contain inflation and attract foreign portfolio investment.
Nigeria’s gross foreign reserves stood at $55.1 billion, while net foreign exchange reserves, excluding short-term swaps, forward commitments and other foreign exchange liabilities, were estimated at $46 billion, according to the report.
The CBN has also continued efforts to improve transparency in the foreign exchange market, address outstanding foreign exchange obligations and meet legitimate demand through the official market.
Higher yields on short-term government securities, including Open Market Operations bills and Nigerian Treasury Bills, have helped make naira-denominated assets attractive to foreign investors.
Increased portfolio investment can support dollar liquidity in the domestic market, potentially easing pressure on the naira.
Market attention is expected to focus on upcoming UK retail sales and October purchasing managers’ index data for further indications of the British economy’s direction and the Bank of England’s policy outlook.
