Naira drops to become the worst-performing currency in first half of 2024
Nigeria’s naira weakened for a ninth straight day against the dollar, making it the worst-performing currency in the first half as a steep devaluation, insufficient dollar liquidity and market volatility hampered efforts to stem its rout.
It’s weakened 0.2% to 1,510 per dollar by the close on Thursday, FMDQ data compiled by Bloomberg show. The losing streak is the longest since July 2017 and takes the decline since the start of the year to 40%.
The naira’s performance is the worst among global currencies tracked by Bloomberg beside that of the pound in Lebanon, which is undergoing an economic crisis and witnessing dollarization.
“While the naira is undervalued and has seen significant adjustment, the supply of dollars needs to improve for the currency to be supported,” Samir Gadio, head of Africa strategy at Standard Chartered Bank Plc in London, said by email. “Portfolio inflows have yet to pick up, even amid still-attractive local rates.”
Nigeria has faced years of acute foreign-exchange scarcity and instability arising from lower crude production and a lack of economic diversification. The local unit has lost about 70% of its value against the dollar since June 2023, when President Bola Tinubu’s government introduced policy changes to lure inflows to help revive the economy.
The currency was volatile between mid-April and May due to the imbalance between demand and supply for the greenback, before the swings moderated in June on an improvement in dollar inflows.
Central bank Governor Olayemi Cardoso said this week the lender believes the currency’s volatility may be a thing of the past and will work to promote investor confidence. Since assuming office in September, he has increased interest rates by 750 basis points to 26.25%, cleared a foreign-exchange backlog and negotiated multilateral dollar inflows to help prop up the currency.
Besides the naira, Egypt’s pound and Ghana’s cedi were the world’s other worst performers in the first half.
“Adjustment and rebalancing in 2024 after years of a heavily managed and misaligned currency regime,” account for the currencies weakening, Gadio said. For the naira, “what will matter going forward is whether it can stabilize on improving foreign-exchange inflows and perhaps see some appreciation,” he said.
