Naira holds firm against British pound at N1,808/£

Latest market action showed the NFEM market rate for the British pound is N1,808.3/£.

The naira has retraced upward since early November from a high of around N1,814.44/£.

Although official rates have shown a shallow bounce against the naira in recent weeks, the street’s parallel market rates for foreign currencies remain under Fourth Quarter seasonal upward pressure.

GBP/NGN began November trading around 1,802.21/£, rallied to an intraday monthly high of 1,814.44/£ on November 4, and traded back down to an intra-month range of roughly 1,783/£-1,788/£.

Intraday price action has been in a small range of N1,786.51/£, where it stabilized above the short-term psychological level of 1,780.

The pair rates in the parallel market trade at roughly N1,870-N1,900/£, well above the official rate depending on location and the size of the transaction.

CBN announced a 350-bp cut to the MPR to 23% in September to ease policy transmission as inflation declined to around 15.4%. The CBN is all but certain to stay on hold at its November 24 meeting, with Nigeria still offering investors a sizable nominal yield premium compared to G7 currencies that supports FX demand.

Net external reserves remain at about $55.3 billion, well above the CBN full-year target of USD 51.04 billion. Oil prices which tend to be supported by geopolitical risks are higher, thanks to local refiners, helping the CBN to defend the official front-end of the FX market, the NFEM window.

The strengthening can be explained by off-season FX demand from importers and holiday travelers, as well as foreign portfolio outflows, against the background of the stronger greenback following hotter-than-anticipated US inflation data.

Continued liquidity into the NFEM window would see the official GBP/NGN stable at 1,775-1,815, while parallel-market premiums would remain under pressure from festive December flows.

Markets will monitor the CBN MPC rate decision on 24 November (for pre-2027 election liquidity management signals) and forthcoming UK inflation and labor figures for the BoE to raise rates again in the run-up to year-end.

The British Pound is gaining against the US Dollar after the UK Gross Domestic Product and Industrial Production figures were released on Thursday. The pair has risen to $1.3260 from the 1.3250 area.

The US Dollar, meanwhile, remains on its front foot against most of its peers. The US consumer inflation data for October and a series of Fed speaking engagements by several policymakers have fueled expectations that the US central bank will raise the rate by at least 25bps in December.

More Fed speakers are scheduled to speak tomorrow. Top on the list are those already worried about high inflation, including Chicago Fed President Austan Goolsbee, San Francisco Fed President Mary Daly, and the important New York Fed President John Williams, who has been preparing the market for another rate hike before the end of the year. The upside risk for the US Dollar is elevated.

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