The British pound weakened against the naira amid a dovish CBN.
The naira’s exchange rate settled at N 2,011.32 against the British pound at the official market, up from Monday’s close of N2,014.9 against the pound, indicating a slight appreciation of the Naira against the pound.
However, it was a different tale for the dollar as it posted a minor reversal from the pre-meeting gains, which occurred when it fell to N1,493/$.
This could also reflect short-term market disappointment over a rate cut, in addition to seasonal FX demand pressures like travel and school payments, which could reduce foreign portfolio investment (FPI) inflows. The Monetary Policy Rate (MPR), which was previously at 27.5 percent, was lowered by 50 basis points by the MPC.
CBN Governor Olayemi Cardoso announced at the post-MPC press briefing on Tuesday, following the Committee’s 302nd meeting in Nigeria’s Federal Capital Territory.
The MPC reduced the asymmetric corridor around the benchmark rate from +500/-100 basis points to +250 and -250 basis points in addition to the MPR cut.
“The adjustment reflects the Committee’s cautious attempt to ease monetary conditions in response to signs of improving macroeconomic fundamentals and moderating inflation,” Cardoso explained.
The CBN said these measures were carefully balanced to maintain continuous disinflation efforts and guarantee that the banking industry has sufficient liquidity to support credit expansion and economic growth. A modest 25–50 basis point reduction in the Monetary Policy Rate (MPR) was predicted before the meeting.
This was expected to be driven by easing inflation (which was expected to drop to about 21.88 percent in July 2025) and the naira’s stability within the N1,480–N1,600/$ range for several months. Before the ruling, the naira was strengthening, closing at N1,497/$ on September 22 (the official rate) and reaching a high of N1,488.92/$ during the week.
British Pound Faces Mounting Pressure Amid Economic Uncertainty
The pound sterling is under pressure from its peers on Tuesday following the release of the weak preliminary September S&P Global Purchasing Managers’ Index (PMI) data for the United Kingdom (UK).
In contrast to estimates of 52.7 and 53.5 in August, the Composite PMI came in lower at 51.0, according to the S&P Global, suggesting that overall business activity expanded, albeit slowly. The manufacturing sector’s ongoing weakness caused a slowdown in the UK’s business activity overall.
Although it was predicted to stay stable at 47, the Manufacturing PMI shrank to 46.2. A business activity contraction is indicated by a number less than 50. The Services PMI fell to 51.9 from the previous reading of 54.2 and estimates of 53.5.
Chris Williamson, Chief Business Economist at S&P, said, “The flash UK PMI survey in September brought a litany of worrying news, including weakening growth, slumping overseas trade, worsening business confidence, and further steep job losses.”
The British government plans to raise taxes in November when it releases the Autumn Budget, but the outlook for economic growth is being hampered by the UK’s growing public debt and rising gilt yields.
Currency traders search for new indications regarding whether the Bank of England (BoE) will lower interest rates again during the remaining policy meetings this year. The BoE maintained its “gradual and careful” monetary easing strategy last week and kept interest rates at 4%, as anticipated.
U.S. dollar gathers strength in global market
The greenback rallied on Wednesday after hitting its lowest point within the last week, due to the cautious banking on more easing overnight made by Fed Chair Jerome Powell.
The U.S dollar index (DXY), which measures the greenback’s strength against six of its most important rivals, advanced by 0.1 percent to 97.4, trying to recover after 97.2 offered fresh support in the last two sessions, during which the American dollar declined to its lowest value since the previous Thursday.
The ongoing tightening cycle imbedded in the set of monetary policies markets expect will exceed two on-the-spot rate cuts at two of the Fed policy meetings still due this year, and a third around the time they will meet in the first quarter of 2026, which the Fed’s projection suggests after last week’s point cut in the policy rate on Wednesday of the previous week.
Powell reiterated that the central bank needs to balance the risk of, on one hand, very high inflation, and on the other, a risky labor market. And that in the course of time, some degree of ‘ultimate loss of control’ will be declared.
Answering other questions during the press conference, which covered the delicate constraints, Powell said that monetary policy risk is ‘none’ that much. But, some degree of cautiousness is still required, to not ‘slip’ into too difficult a position in terms of the economic outlook.
