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Naira trades flat as CBN introduces new foreign exchange code

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The Nigerian naira remained stable at the unofficial market during the second trading session of the week, with currency traders buying the U.S. dollar for N1640/$ and selling at N1650/$.

The Central Bank of Nigeria (CBN) introduced the Nigeria Foreign Exchange (FX) Code on Monday, as part of ongoing efforts to reform the country’s foreign exchange market. The CBN stated that the FX Code is designed to reduce risks and enhance the integrity and efficiency of Nigeria’s wholesale FX market, which will ultimately strengthen the country’s flexible exchange rate system.

According to the CBN, the Nigerian financial landscape has undergone significant improvements, necessitating the adoption of the FX Code, which aligns with global best practices. The new guidelines are intended to ensure market transparency and support better performance amid global economic challenges.

In addition to the FX reforms, the naira fundamentals showed signs of improvement, as Nigeria’s oil production increased to an average of 1.5 million barrels per day, up from previous months. The Dangote refinery’s reduced reliance on oil imports also played a role in easing FX pressure.

PwC observed that the easing FX pressure is partly due to the introduction of the Electronic Foreign Exchange Market System (EFEMS), which has made information more accessible for investors and businesses. The FX Code is also expected to enhance the operations of authorized dealers and boost market transparency.

Global Developments Affect the Dollar

Meanwhile, the U.S. dollar gained strength after President Trump’s recent tariff threats, which triggered buying pressure in the haven currency. The U.S. Dollar Index, which tracks the dollar against a basket of six major currencies, ended a three-day losing streak, rising to around 107.9 index points.

Trump’s announcement of tariffs on imported steel, computer chips, and medications was aimed at boosting U.S. production, adding support to the dollar. This followed his weekend decision to impose tariffs on Colombia, although it was reversed after the country agreed to transport deported migrants via military planes.

Trump also threatened tariffs on China, the EU, and a 25% tax on imports from Canada and Mexico, keeping investors on edge about potential changes in trade policies. The U.S. Federal Reserve’s interest rate decision on Wednesday will be closely watched, as analysts predict another rate cut, although the impact of tariff policies and inflation may complicate the outlook. A dovish stance could weaken the dollar, while a hawkish one may strengthen it.

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