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Bloomberg: Nigeria’s Naira now world’s worst performing currency

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Nigeria's Naira is now the worst performing currency in the world, according to Bloomberg

Nigeria’s Naira is now the worst performing currency in the world within the last month, according to a report by Bloomberg.

According to the report, the Naira has reversed all the gains it made in the prior month, as Dollar inflow declines.

The exchange rate for Friday, May 10, 2024, was published by Diaspora Digital Media (DDM).

It saw the Naira stumble both in the parallel market and at the Central Bank of Nigeria (CBN) official market.

What is the value of Naira today?

In the parallel market, the United States Dollar sold for as high as ₦1480.00, the Euro — ₦1540.00, and the British Pounds — ₦1800.00.

At CBN’s official market, US Dollar went for ₦1415.099, the Pounds — ₦1765.902, and the Euro — ₦1521.3729.

Meanwhile, just few weeks ago, the Dollar dipped heavily, dropping from ₦1,627 on March 8 to ₦1,072 mid-April.

Nigerian President Bola Tinubu’s bubble, however, was busted by Bloomberg.

The medium revealed that Naira’s gains followed a sharp decline in the country’s external reserve.

The subsequent decline of the Naira confirmed the external reserve theory as it stabilised immediately afterwards.

What does Bloomberg report show?

Bloomberg report shows that the Naira is being heavily burdened by an increasing local Dollar demand.

The CBN, presently, is increasingly under immense pressure to keep raising interest rates to stem inflation.

A DDM report published April 16, 2024, showed that Nigeria’s inflation rate had hit highest, while foreign exchange hit all-time low.

Experts suggested back then that the Tinubu-led government’s progress is nothing short of voodoo economics.

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One such expert stressed that inflation generally dips low as foreign exchange gains in a normal economy.

He, however, wondered why the reverse was the case in the case of Nigeria, with inflation hitting the roof.

Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, told Bloomberg that $1.3 billion in Naira futures will mature at the end of this month.

Besides weighing on market sentiment, “the belief is that this will create more demand for dollars,” said Khan.

The slide is the latest bout of volatility since Nigerian President Bola Tinubu relaxed foreign-exchange controls in June.

Naira has depreciated around 68 against the Dollar since then, with Khan said its latest swing shows market forces are being allowed to work.

“When the currency appreciated very fast, there had been a bout of profit taking by offshore investors…

“This meant that Dollar-Naira exchange rate backed up again.

“This is completely in line with the functioning market,” Khan said.

What has CBN done?

It could be recalled that CBN increased rates by a total of 600 basis points at its 2 meetings in February and March.

The trend reversed Naira’s losses, as investors bought higher yielding local assets.

Respecting the recent Naira losses, however, Bloomberg attributed it to increased demand from people and companies.

The report stated: “Naira weakness was also seen on the unofficial market, where it slipped 0.9% to 1,468 per dollar on Friday owing to increased demand from individuals and small businesses…

“Naira appreciation has stalled in the face of sluggish demand from international investors for local assets amid concerns over dwindling reserves…

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“We think the naira is likely to be vulnerable to stronger seasonal FX demand for dollars…

“Demand tends to go up in Nigeria in Q3 and Q4, driven by stronger corporate demand ahead of the holiday.”

The report further blamed Nigeria’s losses to its poor refining capacity despite being one of the largest oil producers.

This, it noted, “means it is importing most of its energy products, leading to significant dollar outflows”.

Two other African currencies — Zambian Kwacha and Ghana’s Cedi — also performed poorly in April.

They ranked beside the Naira among the 4 worst performing currencies in the month of April, says Bloomberg.


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