The naira held its rate at almost the same rate for the third consecutive day from last Friday when it reversed its loss for the week and closed at N1,599.55/$1.

The naira has been maintaining stability, showing signs of resilience despite foreign pressures, supported by ongoing reforms in the country’s financial landscape coupled with the Central Bank of Nigeria (CBN) intervention.

However, in the parallel market, the naira depreciated against the dollar to N1,605/$1, a 0.63% decline from its previous day rate of N1,595/$1. Against the British pound, it declined by 0.72%  to N2,100/£1, from N2,085/£1.

Also, the naira depreciated against the euro by 0.68% to N1,780/€1, from its previous close of N1,768/€1.

While the naira’s performance in the official market offers a glimmer of hope, the mixed signals in the market, accentuated by the currency depreciation against other foreign currencies in the parallel market, highlight the ongoing challenges in achieving currency stability.

The CBN’s sustained interventions are key to stabilizing the market.

The sharp selloff was triggered by ongoing dollar shortages which continued to suffocate the economy at a time when global recession fears remained rife.

On the parallel markets, the domestic currency (Naira) traded around N615 to the dollar – more than 40% weaker than the official rate.

The Naira’s woes were worsened by the selloff in oil prices which raised fears about export earnings and government revenues.

A handsome chunk of Nigeria’s income comes from oil sales, so a drop in the price of the global commodity could force the country to cut back on spending during a fragile period.

The naira may be destined for further pain on both the official and parallel markets thanks to rising inflation, growth concerns, and an appreciating dollar.

Emerging market currencies could experience more pain if the pending Fed minutes strike a hawkish note. At its June meeting, the Fed raised interest rates by 75 basis points, its biggest rate increase since 1994. The minutes should provide more insight into the internal discussions over the decision.

All eyes will be on the US jobs report on Friday. Markets expect the US economy to have added 250,000 jobs in June, while the unemployment rate is seen holding at 3.6%.

Should the headline NFP meet or exceed market forecasts with the unemployment rate holding steady or falling, this could soothe US recession fears.

Alternatively, a lower-than-expected headline NFP figure coupled with a higher-than-3.6% unemployment rate could fuel fears around the US economy bound for a recession down the road.

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In Nigeria, the All-Share Index flashed green – lifted by gains in Conoil Plc, Pharma-Deko & Learn Africa among others. Despite the relatively quiet economic calendar in Nigeria, this could be another eventful week for the local markets due to external forces.

Recapping last week, OPEC+ agreed to hike output in July and August by a larger-than-expected amount as geopolitical tensions roiled global energy markets.

The cartel decided to increase production by 648,000 barrels per day in both July and August.

Given how oil prices remain at multi-year highs and demand is expected to increase due to the US & European summer driving season, this development is good news for oil producers. However, according to data from Bloomberg – Nigeria is pumping roughly 1.3 to 1.5 mbpd.

This is below the new target of 1.772 Mbps for June set by OPEC+ and well under the maximum crude production capacity of 2.5 mbpd.

In the United Kingdom, UK Prime Minister Boris Johnson was flung into the spotlight after enough Conservative MPs triggered a vote of no-confidence in his leadership.

The British pound immediately hijacked our attention following this development as investors were already concerned over the UK’s worsening economic outlook and post-Brexit tensions.

With political uncertainty adding to the toxic mix, one would have expected the pound to collapse like a house of cards – buckling under the strain of negative themes.

So far, this news has not had a significant impact on risk appetite with sterling appreciating against the dollar and other G10 currencies! The Prime minister’s fate will now be decided by a simple secret ballot of MPs, taking place between 6 pm – 8 pm BST on Monday evening.

It may be worth keeping an eye on the US inflation report on Friday which is expected to show consumer prices unchanged at 8.3% in May, matching the figure seen in April. If the report meets or falls below expectations, this may suggest that US inflation may have peaked.

Such a development could fuel speculation around the Fed taking a step back from its ultra-aggressive stance – weakening the dollar. A weaker greenback could provide emerging market currencies some breathing room.

Speaking of currencies, the Naira opened at N416 against the dollar on Monday after closing around N415.50 on Sunday.

On the parallel exchange, the Naira traded at around N605 against the dollar. With inflationary pressures making a return and prices expected to rise ahead of the general elections in 2023, this could translate to Naira ‘s weakness.

Reference: FXTM