Naira falls to N1825/£ against British pound ahead of festive season

The CBN’s latest data showed the naira depreciated against the British pound; it settled above the N1800/£ mark.

The pair fluctuated within a band, moving from highs over N1,900/£ earlier this year to N1,750-N1,850/£ this month.

The increasing demand for foreign exchange during festival seasons, including Christmas, New Year, and summer holidays in Nigeria, is a major driver pushing the Nigerian currency lower against other foreign currencies, specifically the British pound and the US dollar

Many upper-class Nigerians travel abroad for holiday shopping, family visits or holiday trips (mainly to the UK) during festive seasons. Commuters frequently convert Naira to British Pounds (using the PTA or open FX market), boosting demand for foreign currency notes via electronic funds.

Around academic peak intakes (Which also coincide with summer/autumn intake and early year intakes), families are required to pay for tuition and general accommodation costs for their children in the UK in foreign exchange (FX dealers and traders would likely sell at a higher rate to allow for high demand and thus worsen the rate).

The CBN’s rate cut has narrowed the real yield differential and spiked mid-term demand for currencies like the British pound and the American dollar. The added liquidity is at official levels but absorbed by large institutional orders; secondary and BDC market rates move well above the resistance levels (like N1,800/£), causing a spillover from the official weighted average.

The Naira outlook remains bullish as Nigerian Bonny Light traded near the $120 barrel mark. The Federal government receives more foreign exchange revenue from increased international oil prices.

Rising foreign exchange receipts cause an increase in Nigeria’s gross external reserves. More foreign reserves empower the CBN to provide higher FX to the banks, BDCs, and even the ‘official’ market.

The substantial increase in Nigeria’s gross external reserves, which stand at $55 billion and represent multi-year highs, provides the CBN and market makers with significant resources to intervene in, defend, and cushion the foreign-exchange market, thereby reducing concerns about an abrupt currency collapse

The British pound sterling drops to around $1.33 at the opening of the European session on Tuesday. Currency traders remain on the sidelines and refrain from large bets before the UK Autumn Budget and US Fed interest rate decision on Wednesday.

UK new Finance Minister John Healey will present his first budget on Wednesday, when global interest rates are rising, and energy prices soar amid the Iran war. Healey can make public finances less fragile by deflating ballooning health and disability benefits and implementing tax reforms to tackle complexity and perverse incentives.

The new Chancellor of the Exchequer must also boost revenue; an additional one percentage point rise in all UK income taxes would provide an additional £11 billion per year (by 2029/30).

The Federal Reserve increased its target policy rate by 25 basis points to 3.75% – 4.00% last month. The October 2026 meeting is expected to be the next opportunity to increase rates again. Odds for a rate increase for the October.

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