Naira Hits N972 To Dollar In P2P Market As Nigeria Tops in Crypto Trading Volume

The naira maintained its strong momentum against the dollar in the black market while the greenback eased further as traders bet the Federal Reserve was done raising interest rates, although anticipation of key U.S. jobs data kept the naira bulls’ gains in check.

After a swift recovery and breaking the crucial resistance level of N1000 to the dollar late Thursday, currency traders on Binance’s P2P market were last seen trading the naira as high as N972 to the dollar. According to a Chainalysis research report, Nigeria had the largest peer-to-peer cryptocurrency exchange volume globally, moving up one spot to 17th in 2022 from its 18th place ranking last year.

At the official market, however, the naira reached an intraday low of N1018.6 against the dollar on Thursday at the NAFEX window. The release of important U.S. nonfarm payroll data for October later on Friday, however, presented the naira with an uphill battle against the greenback.

Resilience in the U.S. job market gives the Fed more reason to continue raising interest rates, which could undo some of the dollar’s weakness this week. While the Federal Reserve is still open to hiking rates again this year, the final decision will be primarily data-dependent.

Price action indicates tension persists in the U.S. dollar’s rally, given the Dollar Index hit multi-month highs last month with seemingly low market diversity based on fractal dimensions. The dollar index, which measures the greenback against six major peers, was at 105.9 on Thursday, not far from its one-week low of 105.8. The index is on pace to decline 0.4% this week, its third weekly drop since July.

Per the CME FedWatch tool, following the Fed’s pause on rate hikes, markets are now pricing in less than a 20% chance of a December increase, down from 39% a month earlier. However, the Fed did not rule out further hikes given the continued strength of the world’s largest economy.

Meanwhile, Nigeria’s central bank has started clearing the backlog of FX forward contracts, expected to boost the naira, businesses and Africa’s largest economy. The source of funds remains unclear, but foreign airlines were also said to be beneficiaries. The CBN focused on Tier 2 Nigerian banks and international banks, clearing over 75-80% of the FX forward obligations.

Citigroup, Stanbic and Standard Chartered were among those receiving FX futures deliveries this week, to the tune of $72 million, $125 million and $63 million respectively. The FG also said it expects to spend $10 billion settling FX obligations to support the FX market and naira stability. Finance Minister Wale Edun stated FX liquidity will improve in coming weeks, highlighting advanced talks with sovereign wealth funds to invest and provide advances.