Bloomberg’s recent report has revealed that Nigeria’s currency, the naira, has emerged as the world’s worst performing currency in the past month
The currency took a downturn after its recent gains and wonderful performance last month, when it was ranked as one of the best-performing currencies globally as of April 2024.
According to the report, the reversal in Naria’s gains has placed increased pressure on the Central Bank of Nigeria (CBN) to continue raising interest rates.
Naria’s depreciation to 1,466.31 against the dollar was reported to be its weakest level since March 20.
The Bloomberg report released on Friday explained that the recent development is attributed to scarcity of USDollar in the local markets, with only $84 million available on Thursday, half of the previous day’s supply.
The nation’s currency plummeted to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market in March.
Razia Khan, the Chief Economist for Africa and the Middle East at Standard Chartered, who spoke with Bloomberg, estimated that $1.3 billion in naira futures will mature at the end of this month, potentially dampening market sentiment and expected to create more demands for dollars.
She said, “When the currency appreciated very fast, there had been a bout of profit-taking by offshore investors, and this meant that the dollar-naira exchange rate backed up again.
“This is completely in line with the functioning market.”
Continuing, the report by Bloomberg stated that the naira’s current performance is expected to intensify pressure on the country’s apex bank, leading to implementation of another rate hike after its upcoming policy meeting on May 21.
Meanwhile, the CBN was reported to have increased rates by a total of 600 basis points in February and March, adding that this aided the naira in rebounding from its low of 1,627 naira on March 8 to 1,072 in mid-April.
The naira, on Friday, also depreciated by 0.9% to N1,468 against the dollar in the unofficial market.
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