Kevin Warsh, a nominee of President Trump to chair the US Federal Reserve poses a new threat to the Nigerian naira.
On Friday, President Donald Trump made his nomination announcement.
He will replace Jerome Powell, who will leave office in May.
The American dollar records the biggest gain since May prior to announcement of Kevin Warsh by President Donald Trump as his nominee to head Federal Reserve. Warsh is seen to be more worried with inflation than cutbacks to the deep rates.
The US dollar was rebounding a January drop after it rose against all major currencies. The long-term U.S Treasuries also performed poorly.
The Fed chief nominee is an inflation hawk, or tougher on inflation, but he is a Trump-style Fed rate supporter. His nomination made American dollar stronger after several consideration to be hawkish and moderate non-dove compare to aggressive rate-cut supporters.
Who Is Kevin Warsh
Kevin Warsh, native of Albany, New York, studied in a prestigious college of America like Stanford and Harvard, and he is currently living in a wealthy environment. He worked at Morgan Stanley where he became a vice president. He left his banking and mergers and acquisitions job to join the economic advisors of President George W. Bush, especially the ones that dealt with banks, financial markets, and capital flows.
Financial markets think Kevin Warsh not a Trojan horse to Donald Trump and could maintain the independence of the institution. Another sign of such narrative is sharp fall in the price of gold and silver after announcement, means investors didn’t feel they need these safe-haven assets. Nevertheless, the announcement did not impact on the global money markets; in reality, bets made on two Fed cuts in 2026 marginally rose.
Effect on the naira
The Nigerian media and financial sector are examining the nomination of President Trump in reference to the Nigerian naira and the impact that the nomination will have, particularly to the local currency.
Greater dollar strength will put pressure on frontier market currencies such as the naira partly due to the accurate policies of a hawkish American central bank and long-term higher U.S. rates.
The interest rates in the US may also increase further in the long-term, which would make the dollar stronger in case Warsh remains hawkish and focuses not on radical reductions but on the inflation rates.
Naira ended strong in January
In the latest trading session in January, the Naira closed at N1,391/ against the dollar in the official foreign exchange market due to the improved liquidity position and an increase in the external reserves of the country. The naira regained its losses it had incurred in the last trading session when its value rose consistently in the official market during the week.
On Thursday, the naira gained against the dollar in the parallel market by N1,490/ $ and on Friday, it appreciated to N1,453/ $. The amount of foreign reserves increased to 46.18 billion in Nigeria in the week.
