Exchange rate

Ghana reported its inflation rate topped 50% for November triggering another possible interest rate hike in the short term. However, we believe the $3 billion ...

In a nutshell: The current exchange rate is not fully reflective of the value of the naira in the short to medium term. Should the war end, this will cool global inflation and by extension Nigeria’s inflation rate. - The recent depreciation recorded in November was largely due to the policy on new naira notes designs. - Nigeria is experiencing the same economic challenges faced by Ghana with an inflation rate of 21.47% highest in over two decades. Ghana reported its inflation rate topped 50% for November triggering another possible interest rate hike in the short term. Tracking these factors is critical to gauging Nigeria’s exchange rate stability. - A drop in the inflation rate helps boost exchange rate stability in the medium to long term, not just in Nigeria but globally. - A move towards a more market-friendly determination of the exchange rate and unification of rates could also augur well for the exchange rates in 2023. - The war’s contribution to inflation also led to a rise in Nigeria’s imported inflation which is around 14%. - The exchange rate between the naira and the dollar can strengthen in a matter of days just over a policy change or Nigeria cuts a major deal for a concessionary loan. - The combination of oil prices and increased crude oil production is a major booster for Nigeria’s external reserves and by extension the exchange rate. Nigeria’s exchange rate between its naira and the dollar depreciated to as high as N850/$1 earlier in November, and at some point, analysts feared it could drop to as low as N1000/$1 by year-end.