Blomberg’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.
However, Tribune Online reports
that 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.
Post a Comment