Unexpectedly Depreciates, Becomes WORST Performing Currency Despite CBN Measures: SEE Current Dollar/Naira Exchange Rate
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According to a recent Bloomberg report, the Naira has transitioned from being the strongest to the weakest performing currency. This marks a turnaround from its recent strong performance, as it now stands as the worst-performing currency globally after an impressive showing last month. The report released on Friday underscores the increased pressure. on the Central Bank of Nigeria to continue its trend of raising interest rates.
The Naira has weakened to 1, 466, 31 against the dollar, reaching its lowest level since March 20. This depreciation is linked to the limited availability of the US currency locally, with only $84 million accessible on Thursday, which is half of the previous day’s supply.
Yerni Cardoso, the CBN governor, previously lauded the Naira as the strongest currency globally as of April 2024.
In March, the Naira encountered
difficulties, dropping to as low as N1, 600/$1 on the official market and N1800/$1 on the parallel market. Cardoso attributed this
accomplishment to a series of reforms in the foreign exchange market and positive feedback from leading international investment institutions.
Razia Khan, the Chief Economist for Africa and the Middle East at Standard Chartered, estimated in a conversation with Bloomberg that $1. 3 billion in Naira futures would mature by the end of this month, potentially affecting market sentiment negatively.
Khan stated, “The expectation is that this will lead to increased demand for dollars. When the currency appreciated rapidly, offshore investors engaged in profit-taking, causing the dollar- naira exchange rate to rise again.
*This aligns entirely with the normal functioning of the market. ”
The report also points out that the naira’ s decline in performance is likely to increase pressure on the CBN to implement another rate hike after its forthcoming policy meeting on May 21.
Between February and March, the Central Bank raised rates by a total of 600 basis points. This action helped the naira recover from its low of 1, 627 naira on March 8 to 1, 072 in mid- April, as investors sought higher returns from local assets.
The Chief Executive of Forward Marketing Bureau de Change Ltd., Abubakar Muhammed, who tracks data in Lagos, reported that the naira’ s weakness was evident on the unofficial market, where it fell by 0.9% to 1, 468 naira against the dollar on Friday. This decline was attributed to increased demand from individuals and small businesses.
Two other African countries are among the four worst-performing currencies in the past month.
On Friday, the Zambian kwacha reached a record low of 27. 3969 per dollar. Meanwhile, Ghana’ s cedi weakened to 13. 99 against the dollar on the same day, marking its lowest level since 2022. Both countries are currently undergoing debt restructuring processes.
