South Africa’s currency has appreciated to a 20-month high after the Reserve Bank’s recent rate cut while the Central Bank of Nigeria’s rate hike had pulled the Naira downward, though it has started recovering following CBN recent sell of dollars to BDCs at N1,590.
The rand appreciated to R17.1860 per dollar today from R17.22/$ traded yesterday Wednesday, September 25, 2024. It has also appreciated by 1.6 percent from R17.4670/$ since the SARB cut its rates last week.
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Analysts have attributed the rand’s current strength partly to positive sentiment in the wake of interest rate cuts by the South African Reserve Bank (SARB) and the U.S. Federal Reserve.
“We are likely to continue to trade in an R17.20/R17.40 range for now,” said Andre Cilliers, currency strategist at TreasuryONE.
Meanwhile, the naira has declined by 8.2 percent since the Central Bank of Nigeria recently raised its Monetary Policy Rate (MPR), for the fifth time, by 50 basis points on Tuesday.
At the Nigerian Autonomous Foreign Exchange Market, the naira fell from N1541/$ on Friday, September 20, 2024, to N1667.42/$ today Wednesday, September 25, 2024.
In the black market, also known as the parallel market, the local naira fell to a seven-month low of over N1,700 per dollar, the lowest fall since February 22, 2024, when the dollar was quoted at the rate of N1,850/$.
Analysts from Coronation observed that the naira had appreciated marginally by 1.5 per cent in the NAFEM window, since the previous MPC meeting in July 2024, closing at N1,562.7 per dollar as of September 23, 2024.
The CBN has raised the benchmark interest rate by a total of 850 basis points to 27.25 percent from 26.25 percent, since Olayemi Cardoso assumed office, making it the highest recorded in the country.
The Monetary Policy Committee noted that the CBN’s tight monetary policy had brought about relative stability and a degree of convergence in exchange rates across various market segments.
Nigeria’s inflation slowed for the second month to 32.15 percent in August, data from the National Bureau of Statistics shows.
Read also: Interest rate hike eyes inflation, naira stability
Despite easing inflation, analysts say that the rate hike is targeted at easing the potential inflationary pressure of petrol price hikes and attracting foreign investments into the economy.
The recent currency depreciation highlights the complex dynamics in the foreign exchange market and the ongoing challenges in achieving currency stability.
Muda Yusuf, director/CEO, Centre for the Promotion of Private Enterprise (CPPE), earlier told BusinessDay, “The rate hike cannot address these issues. The issues are much deeper. The rate hike is putting unnecessary pressure on those who are borrowing money.”
