Why naira is set to appreciate against US dollar after US government

• The US Federal Reserve's decision to lower interest rates is set to weakened the United States Dollar
• The decision has provided an opportunity for the Nigerian currency to strengthen in the foreign exchange market
• Economist says that the US federal reserve decision will also help attract more investment into Nigeria

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

Nigerian currency, the naira has been provided lifeline by the US Federal Reserve after cut in its key lending rate by half a percentage-point.

The decision which was taken on Wednesday, September 17 is the first reduction for more than four years.

Naira is expected to improve against US dollar Photo credit: CBN
Source: Getty Images

What does the US Fed reserve cut means?

The interest rate cut, announced by Federal Reserve head Jerome Powell means lower borrowing cost

By lowering borrowing costs, Powell said will help to boost domestic spending and investment in skils development.

However, the other side of the decision is that the rate cut will weaken the US Dollar on global foreign exchange markets.

Good news for naira

For Nigeria, which has been battling currency depreciation and inflation, the US Fed's decision offers another hope of recovery.

Since the start of 2024, the naira has lost over 100% of its value against the dollar, falling to as low as N1,658 in the official market.

The Central Bank of Nigeria is having its Monetary Policy Meeting(MPC) on Monday September 23 and Tuesday September 24.

The decision taken will likely affect how much gain Nigeria can maximise from the US Fed interest rate cut.

A weaker dollar could lower the cost of imports and reduce pressure on Nigeria's foreign reserves.

Chinedu Okafor, a Lagos-based economist expressed optimism of brighter days ahead for naira.

He said:

"This is an opportunity for the naira to strengthen its position and fall below N1,600 to a dollar."A weaker dollar is good news, as it will help lower the cost of imported goods, which could ease inflationary pressures, given that Nigeria is largely an import-dependent country."

New platforms identified as threats to naira

Earlier, Legit.ng reported that Nigerians identified the emergence of two cryptocurrency platforms as the reason for the recent fall of the naira.

The earlier decline of the naira was attributed to alleged market manipulation by Binance.

Nigerians have blamed the latest depreciation on new crypto exchange platforms, namely BYBIT and BITGET.

PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ find the “Recommended for you” block on the home page and enjoy!

Source: Legit.ng