The nation’s currency, the naira, has taken a downturn, emerging as the world’s worst performing currency in the past month, a recent Bloomberg report says.
The reversal came after naira’s recent gains, emerging as the world’s worst-performing currency after a wonderful performance last month.
The report, which emerged on Friday, emphasised that the development has placed increased pressure on the Central Bank of Nigeria, CBN, to continue raising interest rates.
The local currency depreciated to 1,466.31 against the dollar, marking its weakest level since March 20.
According to the report, the decline is attributed to the local scarcity of the US currency, with only $84 million available on Thursday, half of the previous day’s supply.
Yemi Cardoso, CBN governor, had previously hailed the naira as the best-performing currency globally as of April 2024.
The naira faced challenges in March, plummeting to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market.
However, the CBN governor attributed the achievement to a series of foreign exchange market reforms and positive sentiment from leading international investment institutions.
The Chief Economist for Africa and the Middle East at Standard Chartered, Razia Khan, spoke with Bloomberg, estimating that $1.3 billion in naira futures will mature at the end of this month, potentially dampening market sentiment.
“The belief is that this will create more demand for dollars.
“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,” she said.
The report further pointed out that the decline in the naira’s performance is expected to intensify pressure on the CBN to implement another rate hike after its upcoming policy meeting on May 21.
The report noted that the Central Bank increased rates by a total of 600 basis points in February and March, saying this aided the naira in rebounding from its low of 1,627 naira on March 8 to 1,072 in mid-April, as investors sought out higher-yielding local assets.
The weakness of the naira was also seen in the unofficial market, where it depreciated by 0.9% to N1,468 against the dollar on Friday.
