Naira Named World’s Worst-Performing Currency in First Half of 2024
The Nigerian Naira has been declared the world’s worst-performing currency in the first half of 2024, according to a report released by Bloomberg. This ranking places the Naira below even the Lebanese pound, which continues to suffer from a significant economic crisis of its own. With various global currencies struggling, the Naira’s performance is noteworthy in its significant depreciation in value.
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Aside from the Naira, other currencies that have shown poor performance in the first six months of the year include Egypt’s pound and Ghana’s cedi. By the close of trading on Thursday, the Naira weakened by 0.2% to 1,510 per dollar. This decline, as recorded by FMDQ data, marks the longest period of consistent devaluation since July 2017, accumulating to a downtrend of about 40% since the year’s beginning.
The alarming depreciation puts the Naira at the bottom of global currencies tracked by Bloomberg, challenged only by the Lebanese pound’s dire situation. Lebanon is currently grappling with an economic crisis that has prompted widespread dollarization within the country.
Experts from the financial sector have weighed in on the Naira’s performance. According to Samir Gadio, the head of Africa strategy at Standard Chartered Bank in London, the Naira is significantly undervalued despite substantial adjustments. Gadio highlighted the need for an improved supply of dollars in the market to support the currency’s recovery, mentioning that portfolio inflows remain dormant although local rates appear attractive.
Nigeria has been facing a protracted foreign exchange scarcity, exacerbated by dwindling crude production and limited economic diversification. Since June 2023, the introduction of policy changes by President Bola Tinubu’s administration aimed at injecting life into the Nigerian economy has seen the Naira losing approximately 70% of its value against the dollar.
The currency’s valuation witnessed fluctuations, particularly between mid-April and May due to a mismatch between demand and supply for dollars. However, the scenario improved in June, aligning with enhanced dollar inflows.
Olayemi Cardoso, the Central Bank Governor, recently expressed optimism regarding the currency’s stability. He affirmed the bank’s commitment to rebuilding investor confidence and noted that efforts were underway to address the currency’s volatility, which had significantly reduced. Taking office in September, Governor Cardoso has since implemented measures including a 750-basis point increase in interest rates to 26.25%, elimination of foreign exchange backlogs, and facilitating negotiations for multilateral dollar inflows, all aimed at stabilizing the Naira.
The concerted efforts to remedy the Naira’s depreciation highlight the Nigerian government’s and the Central Bank’s acknowledgment of the critical nature of a stable currency for economic recovery and growth. As these measures continue to unfold, the market eagerly anticipates their impact on the Naira’s performance in the latter half of 2024 and beyond.
