Naira slumps to bottom of global currency rankings in 2024

Business a.m.

The Nigerian naira has been ranked the worst-performing currency globally in the first half of 2024, according to a recent report released by Bloomberg.

The report identified several factors that contributed to the naira’s underperformance, including devaluation, a lack of dollar liquidity, and market volatility, which have reportedly hindered the CBN’s ability to stabilise the currency.

Citing FMDQ data, the report mentioned that naira’s persistent decline, extending over a record nine days, pushed its value to 1,510 per dollar as of Thursday,June 27. This represents a 40 percent drop from the beginning of the year and has not been seen since July 2017.

In a further analysis of global currencies, Bloomberg’s data revealed that Nigeria’s naira, save for the Lebanese pound, posted the worst performance among currencies tracked by the financial news outlet. The Lebanese pound, it explained, is undergoing dollarisation, where the US dollar is replacing the local currency in daily transactions as a result of an ongoing economic crisis.

The Egyptian pound, and Ghanaian cedi also experienced marked underperformance in comparison to other currencies during the first half of 2024, according to Bloomberg’s report, highlighting broader issues of economic instability and market pressures in the respective countries.

In stark contrast to its standing in March, when it was declared the best-performing currency worldwide, the naira’s recent relegation to the bottom of the pack, represents a dramatic shift in its fortunes.

Bloomberg noted that in the intervening months, the currency experienced significant volatility between mid-April and May, primarily due to an imbalance between the demand for and supply of the US dollar. However, this trend reportedly eased in June, as dollar inflows increased.

Samir Gadio, head of Africa Strategy at Standard Chartered Bank Plc, addressed the naira’s current instability in a note obtained by Business a.m.

Gadio commented that while the naira is undervalued and has witnessed substantial corrections, an improvement in the dollar supply is necessary for the currency to be supported. He also stated that despite Nigeria’s attractive local rates, portfolio inflows have not yet increased, highlighting the need for additional measures to stabilise the currency and support its value.

“What will matter going forward is whether it can stabilise on improving foreign exchange inflows and perhaps see some appreciation,” he added.