Naira holds at N1,497/€ as French debt crisis drags euro down

The Naira kept its value gains against the European common currency as the European currency plunged lower after France’s debt yields broke above 5%.

The Naira settled at N1,497/€ at the mid-week trading session, according to the latest figure obtained from the Central Bank of Nigeria (CBN), crossing the resistance level of N1,500/€ for the first time since April 2024.

French 10-year government bonds fell Wednesday, pushing yields higher by seven basis points. The rate on benchmark French debt advanced to 5% for the first time since 2002, after surging energy costs heightened anxiety over the country’s fiscal future.

This widened the gap to the German equivalent by 159.4 basis points, the biggest margin in 15 years.

The spread, considered the best proxy for euro-area credit risk, has widened substantially since the end of September as prospects of France passing a debt-ridden budget are coming into question. Outrage over skyrocketing living costs boiled over weekend demonstrations.

The CBN moved slightly dovish after nearly three years of aggressive monetary tightening to suppress runaway inflation (which surged over 30% in the previous years

Nigeria’s headline inflation decelerated for two consecutive months to around 14.6%, supported by Exchange Rate Stability and prior monetary tightening actions.

The benchmark rate (MPR) was cut to 23% to align with actual money market levels and bolster economic activities. However, the CRR for commercial banks remains high at 45%. The Nigerian Apex Bank is watching liquidity build-up (with broad money supply (M2) more than N146 trillion) to avoid a repeat of a speculative attack on the Naira.

Latest technical action highlighted that the pair was within striking distance of a pivotal psychological level at N1,500/€. (Major Resistance is at 1,580/€. – 1,600/€ Major swing highs created before the completion of the current structure in mid-2026. Support is at N1,440/€ October 2026 low. A breakout would affirm the continuation of the main long-term downtrend towards N1,400/€

Although the Euro has headwinds from rising French debt costs and a fiscal logjam, the Naira is at a new crossroads, leaning away from the maximum of monetary tightening while keeping the tight bank reserve requirements to ensure FX stability

The euro lagged among Group-of-10 currencies against the dollar, falling as much as 0.2% to $1.1214. European bond volatility driven higher by energy prices on Wednesday, with benchmark European gas prices jumping more than 4% and Brent crude around $110 a barrel.

The European central bank is expected to hold its key rate steady at 2.5 percent at its meeting next week, but a hike was virtually priced ahead of the end of the year, according to a Reuters poll.

Meanwhile, in the US, traders are pricing in very little chance of a Fed rate hike next week, with the next one coming later in December, according to CME’s Fed Watch tool.

A divided parliament makes it hard to reach a compromise on next year’s spending in a way that ensures the bills pass, and that is proving pain. With presidential elections just six months away, things are unlikely to get better.

However, France remains rated as an investment-grade borrower, and banks holding the lion’s share of French government debt remain much better capitalized than in 2010. And the European Central Bank has demonstrated its capacity to tame bond-market mayhem over the years.

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