Naira holds near N1,834/£ despite pound weakness against dollar

The naira traded at about N1,834 to the British pound at the opening of Friday’s foreign exchange session, holding close to recent levels despite renewed weakness in the pound against the United States dollar amid heightened geopolitical tensions and shifting monetary policy expectations.

Market data showed the pound exchanged at N1,834/£, having traded within a range of N1,813 and N1,862 during the month, indicating that the N1,830 level has emerged as a key trading anchor for the currency pair.

Demand for the British currency in Nigeria remained elevated, driven largely by payments for medical treatment in the United Kingdom, tuition fees for students in British schools and other offshore obligations requiring sterling.

Analysts noted that any sustained move above the N1,840/£ level could trigger fresh buying interest towards the month’s high around N1,850/£, although traders are also watching month-end foreign exchange liquidity from authorised dealers and Bureau De Change operators, which often influences market direction.

The Central Bank of Nigeria’s tighter monetary policy stance and improved external reserves have helped moderate volatility in the foreign exchange market despite persistent demand pressures.

Nigeria’s foreign reserves recently climbed above $52 billion before easing slightly, providing the apex bank with greater capacity to intervene in the market and support exchange rate stability.

Nevertheless, Nigeria’s inflation remains significantly higher than that of the United Kingdom, continuing to exert depreciation pressure on the naira over the medium term.

In the international market, the British pound weakened against the US dollar, trading around 1.3445 during early European trading after investors sought the safety of the greenback following renewed military tensions in the Middle East.

The US dollar found additional support after fresh missile strikes involving the United States and Iran heightened geopolitical risks, boosting demand for safe-haven assets.

Despite the weakness, sterling continued to draw support from expectations that the Bank of England would maintain its benchmark interest rate at 3.75 per cent, reflecting the central bank’s cautious approach to monetary easing amid moderating inflation.

Financial markets currently expect the Bank of England to leave rates unchanged at its next policy meeting, with only a limited probability of any further tightening before year-end.

Meanwhile, recent United States economic data pointed to slowing growth and easing inflation, reducing expectations of another immediate interest rate increase by the US Federal Reserve.

The US economy expanded at an annualised rate of 1.5 per cent in the second quarter, below the previous quarter’s 2.1 per cent growth, while the Personal Consumption Expenditures Index recorded its first monthly decline since April 2020, reinforcing expectations that the Federal Reserve may remain on hold after retaining its policy rate within the 3.50 to 3.75 per cent range..