In a disconcerting revelation, the Naira is grappling with a dubious distinction as one of the globe’s worst-performing currencies this year, as reported by Bloomberg. This unsettling forecast suggests that 2023 could mark the Naira’s bleakest year since the return to democracy in 1999, with experts anticipating a further slump in 2024.
Bloomberg’s latest report underscores the Naira’s stark decline, plummeting by 55% to 1,043 per dollar as of Thursday. Alarming as this is, it positions the Naira as the world’s poorest performer, trailing behind only the Lebanese pound and the Argentine peso among the 151 tracked currencies.
This downward spiral hit a crescendo just days before the New Year, as the Naira touched an unprecedented low of N1,043.09 per US dollar in the official market.
The genesis of this devaluation, as per the report, can be traced back to June when the Central Bank of Nigeria (CBN) allowed the Naira to trade more freely. President Bola Tinubu’s decision to scrap costly petrol subsidies further fueled this economic downturn.
Compounding the issue, Nigeria’s foreign reserves find themselves at their lowest point in six years, burdened by overdue short-term overseas obligations. Vetiva Capital Management Ltd’s forecast, quoted by Bloomberg, indicates that the Naira might continue its downward slide unless the Tinubu-led federal government attracts international investors or revs up oil output.
Vetiva Capital’s note to clients emphasizes the imperative need for further devaluation, coupled with a tighter monetary policy, to rectify imbalances in the foreign exchange (FX) market. The key, according to them, lies in a substantial increase in external reserves, a noteworthy surge in foreign exchange inflows, and a reduction in money supply – a trifecta that could breathe positivity back into the beleaguered Naira.
