Fed rate hike pressures naira as dollar gains, CBN liquidity squeeze looms

The US Federal Reserve raised its key interest rate by 25 basis points to a range of 3.75%-4.00% earlier this week, ending a hiatus since 2023 with a unanimous 12-0 vote under Chair Kevin Warsh. The move was driven by stubborn US inflation above 2%, fueled by rising energy prices and strong job gains, and signaled a "higher for longer" stance with further hikes projected.

For Nigerians, the hawkish Fed policy pulls capital toward dollar‑denominated assets, reducing foreign portfolio inflows that have been supporting the naira. The naira has held steady around N1,329/$ for four straight sessions—the longest stability since July 2025—but the upward pressure on the dollar limits near‑term bullish sentiment. Meanwhile, the Central Bank of Nigeria’s Open Market Operations auctions, approaching N3 trillion to tighten liquidity, face a global liquidity squeeze that is pushing up interbank transaction volumes and increasing demand for foreign exchange.

If you hold foreign currency obligations or rely on imported goods, consider how a weaker naira could raise your costs. Will you adjust your foreign currency holdings, hedge your exposure, or budget for higher import costs if the naira depreciates further?

SOURCE: https://nairametrics.com/2026/09/17/hawkish-us-fed-tames-naira-bullish-outlook/