In a stark reversal of fortune, the Naira has transitioned from being the best-performing currency to the worst, as highlighted in a recent Bloomberg report.
This downturn follows a period of notable gains, with the Naira emerging as the world’s top currency performer just last month.
The report, issued on Friday, underscores the heightened pressure on the Central Bank of Nigeria (CBN) to sustain interest rate hikes amidst the currency’s depreciation.
The Naira now stands at 1,466.31 against the dollar, marking its weakest level since March 20, attributed primarily to the scarcity of the US currency, with only $84 million available on Thursday—half the previous day’s supply.
CBN Governor, Yemi Cardoso, previously lauded the Naira’s performance, touting it as the best-performing currency globally as of April 2024.
However, challenges emerged in March, with the Naira plummeting to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market.
Cardoso attributed this achievement to foreign exchange market reforms and positive sentiment from leading international investment institutions.
Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, anticipates that the maturation of $1.3 billion in Naira futures by month-end could heighten demand for dollars, potentially exacerbating the Naira’s decline.
The report also suggests that the Naira’s weakening performance could compel the CBN to implement another rate hike following its upcoming policy meeting on May 21.
Previous rate increases in February and March, totaling 600 basis points, helped the Naira rebound from its March low to mid-April, as investors sought higher-yielding local assets.
Furthermore, the unofficial market witnessed Naira weakness, slipping 0.9% to 1,468 Naira against the dollar on Friday. Abubakar Muhammed, CEO of Forward Marketing Bureau de Change Ltd., attributed this to heightened demand from individuals and small businesses in Lagos.
In addition to the Naira’s plight, two other African currencies—Zambian kwacha and Ghana’s cedi—rank among the four worst-performing currencies, reflecting broader economic challenges faced by these nations amid debt restructuring processes.