Naira Ranks Among The World’s 10 Worst Performing Currencies

Naira Ranks Among The World’s 10 Worst Performing Currencies

Nigeria’s local currency, the naira, has been identified as one of the 10 worst-performing currencies globally, according to a Bloomberg report……CONTINUE READING

The report reveals that five of the poorest-performing currencies are from Africa, including the Zambian kwacha and Angolan kwanza, alongside the naira.

This decline in African currencies is attributed to various factors, such as economic difficulties, fluctuating commodity prices, inflation, and insufficient dollar liquidity. Many African nations, which rely heavily on oil exports, are particularly susceptible to falling oil prices.

Keonethebe Bosigo, a portfolio manager at Mazi Asset Management, noted that while oil prices play a crucial role, the primary issue is inadequate currency management and economic imbalances. He explained that the naira’s struggles are largely due to its overvaluation, stemming from a failure to allow it to adjust, leading to diminished confidence.

Irmgard Erasmus, an economist at Oxford Economics, echoed these concerns, highlighting persistent liquidity issues and dollar supply challenges. Despite efforts to liberalize Nigeria’s current account since President Tinubu took office in 2023, the naira remains under significant strain.

“The naira is undervalued relative to its long-term neutral value due to ongoing liquidity and dollar supply problems,” Erasmus stated. He added that while falling Brent crude prices have exacerbated the situation, improvements in dollar liquidity could support a potential recovery for the naira over time.

Erasmus further noted that, in the absence of market distortions, the naira should be trading around N1,100 per dollar, compared to its recent rate of N1,544. However, he cautioned that without substantial policy reforms and enhanced dollar supply, the future of the naira remains uncertain.