The Nigerian Naira managed to gain some ground against the Euro in the week under review in the black market due to exchange rate reforms in Nigeria and the political instability in Europe that continues to play out.
The value of the euro on the parallel market depreciated against the naira at N1690 as at the end of 2nd December, 2024, in contrast to N1852/€. This demonstrates a bearish sentiment in the EUR/NGN exchange market.
Reforms in Nigeria’s FX Market
Two significant developments occurred this past decade in Nigeria’s foreign exchange market, which resulted in more effective and less corruption-prone trading. The introduction of the Electronic Foreign Exchange Matching System (EFEMS) has been an important step towards efficiency and transparency in the Nigerian foreign exchange market. On this platform banks and authorized dealers get a straightforward opportunity to perform transactions sending messages to other parties while getting real time vision of the market by its participants and regulators.
According to Omolara Duke, who is a Director of Financial Markets at the CBN the reform is one of the most empowering for the market. The introduction of this system has minimized the bottlenecks that used to characterize the trading processes further explaining the recent strength of the Naira.
Political Instability Hitting Euro
In the case of France, the situation has been worrying for quite some time, which has definitely contributed to the depreciation of the Euro. Economically the Euro has moved south, having posted declines, particularly against the US dollar, at about over three percentage points in a month, and on the currency exchange, the dollar buys euro at almost €0.99.
Unrest in France intensified after the firing of Prime Minister Michel Barnier, after he had suggested measures in the budget for 2025 which included tax increases and cuts in public expenditure. Out of demand for confidence, the vote was passed and stability was again shaken in terms of the overall growth prospects of the country.
There are also external factors such as the possible tariffs on European exports which will be aggravated by the incoming administration of U.S president elect Donald Trump.
European Economic Outlook
In spite of heroinics in tons of pressure the Eurozone is showing signs of recovery. Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) signal people to stay cautious as signs pointed to a reversal, but so far it has prevailed.
European, a member of the euro zone especially with the euro currency is always optimistic in fuelling a December month. Statistically greed price the euro at 71% confidence to close the month in the green. How the European Central Bank’s upcoming plan on interest rates management will be characteristic defining the growing trend of the euro in the foreseeable future.
With these factors into consideration, the recent dynamics of the Naira indicates not only the conditioned improvements of internal policies, but also the relations with the external markets.
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