The naira ended the first half of 2024 as the world’s worst-performing currency, with a steep devaluation, insufficient dollar liquidity, and market volatility undermining efforts to stabilize its value.
The naira’s performance is the worst among global currencies tracked by Bloomberg besides that of the pound in Lebanon, which is undergoing an economic crisis and witnessing dollarization.
“While the naira is undervalued and has seen significant adjustment, the supply of dollars needs to improve for the currency to be supported,” Samir Gadio, head of Africa strategy at Standard Chartered Bank Plc in London, said by email. “Portfolio inflows have yet to pick up, even amid still-attractive local rates.”
Nigeria has faced years of acute foreign exchange scarcity and instability due to lower crude production and a lack of economic diversification.
Since June 2023, when President Bola Tinubu’s government introduced policy changes to attract inflows and revive the economy, the local unit has lost about 70% of its value against the dollar.
The currency experienced volatility between mid-April and May due to the imbalance between demand and supply for the greenback. However, the swings moderated in June with an improvement in dollar inflows.
Central Bank Governor Olayemi Cardoso stated this week that the lender believes the currency’s volatility may be a thing of the past and is committed to promoting investor confidence.
Since assuming office in September, he has increased interest rates by 750 basis points to 26.25%, cleared a foreign exchange backlog, and negotiated multilateral dollar inflows to help stabilize the currency.
BUSINESS INSIDER
