Naira crashes above N600/$ at Aboki Black Market (See new exchange rate)

Naira has crashed above N600/$ at Aboki Black Market, See New Exchange Rate below.

IDOMA VOICE reports that a stronger dollar may mean bad news for the naira as it is expected to push above N600/$ due to the US Fed’s hawkish stance and the bullish momentum of the dollar index.

This online newspaper understands that all eyes will be on the Federal Reserve this week, as Chairman Jerome Powell is likely to announce a rate hike as well as new details on the Fed’s $9 trillion balance sheet unwinding plan.

IDOMA VOICE reports that the dollar rose towards a 20-year high on Monday as the euro struggled around the $1.05 mark. At the time of writing, the dollar index was trading a $103 up 10% within the last 6 months.

Due to the  US dollar integration into the global economy, its gains are putting more pressure on businesses and governments as they prepare for rising interest rates on their dollar debt, particularly in nations like Nigeria that rely heavily on imports.

At the time of writing this article, the exchange rate at the peer-to-peer forex market was trading at N591.2/$1 down from closing at N565/$1 on December 31, 2021. This is indicative of a N26 depreciation YTD.

• • In an environment where people have become accustomed to ultra-easy credit, higher rates are likely to cause significant volatility. It might also boost the Dollar’s yield appeal, boosting demand for the greenback even more. Hence, servicing sovereign bonds issued in dollars could be a difficult task for countries that have dollar debt.
  • Furthermore, if economic activity weakens, developing economies’ currencies may suffer a double blow as demand for risky assets dwindles.