According to a recent Bloomberg report, the Naira has nosedived to a deplorable status, shifting from the pinnacle of success to the depths of adversity in currency performance.
This abrupt reversal follows a period of commendable progress, catapulting the Naira to the forefront of global currencies, only to plummet and seize the unenviable title of the world’s worst-performing currency.
Highlighted in Friday’s report is the mounting pressure on the Central Bank of Nigeria (CBN) to navigate this difficult terrain, particularly through continued interest rate adjustments.
The Naira’s descent to 1,466.31 against the dollar signifies a distressing downturn, marking its lowest valuation since March 20.
This downturn is attributed primarily to the scarcity of US currency domestically, with Thursday’s supply dwindling to a mere $84 million, half the previous day’s availability.
While CBN Governor Yemi Cardoso once lauded the Naira’s global supremacy as of April 2024, recent challenges have underscored its vulnerability.
March witnessed the Naira’s plunge to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market.
Cardoso attributed the Naira’s prior success to strategic foreign exchange reforms and positive sentiment from esteemed international investment institutions.
However, Bloomberg’s conversations with Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, suggest a looming challenge. Khan estimates that $1.3 billion in Naira futures will mature by month-end, potentially fueling increased demand for dollars.
With market dynamics shifting, the pressure mounts on the CBN to consider further rate adjustments after its impending policy meeting on May 21.
In previous months, the Central Bank implemented a total rate hike of 600 basis points, providing a lifeline as the Naira rebounded from its nadir of 1,627 naira on March 8 to 1,072 by mid-April.
Further worsening concerns, Naira’s depreciation spilled over into the unofficial market, where it weakened by 0.9% to 1,468 naira against the dollar on Friday.
Also, Bloomberg notes that two other African currencies, the Zambian kwacha and Ghana’s cedi, rank among the four worst-performing currencies.
The Zambian kwacha plummeted to a record low of 27.3969 per dollar on Friday, while Ghana’s cedi weakened to 13.99 against the dollar, marking its lowest level since 2022, amidst ongoing debt restructuring efforts in both nations.
