In 2023, the Naira has earned the dubious distinction of being among the world’s poorest performing currencies, as reported by Bloomberg in its latest update. According to the report, the currency is on track for its most challenging year since the return to democracy in 1999, with analysts anticipating additional depreciation in the coming year,Daily Trust report.
Bloomberg highlighted that the Naira experienced a significant decline of 55 percent throughout the year, reaching 1,043 per dollar as of Thursday. This makes it the globe’s worst-performing currency among 151 tracked, following closely behind the Lebanese pound and the Argentine peso.
Notably, the Naira hit an all-time low on Thursday, depreciating to N1,043.09 per US dollar in the official market just days before the New Year. The report attributes this decline to the Central Bank of Nigeria (CBN) allowing the currency to trade more freely in June, coupled with President Bola Tinubu’s decision to eliminate costly petrol subsidies.
The report further highlighted that Nigeria’s foreign reserves are currently at their lowest point in six years, with a significant portion committed to overdue short-term overseas obligations. Vetiva Capital Management Ltd, cited by Bloomberg, predicts a potential further slide in the currency unless the federal government, led by Tinubu, attracts international investors or increases oil output.
In a communication to clients, Vetiva Capital emphasized the necessity for additional devaluation, coupled with a more stringent monetary policy, to address imbalances in the foreign exchange market. The note indicated that a substantial boost in external reserves, a notable increase in foreign exchange inflows, and a reduction in money supply would be positive factors for the Naira.