Nigeria’s Naira Plummeting: A Global Worry as It Ranks Third in Currency Depreciation
The Nigerian naira has taken a significant hit, with its value plummeting by 70% against the US dollar this year. According to recent data, it now ranks as the third-worst performing currency globally, trailing only the Lebanese pound and the Ethiopian birr.
The latest blow came on Monday, when the naira hit an all-time low of 1,670.65 per dollar, following a 4.3% decline. This drastic fall was largely driven by a 72% drop in dollar liquidity, which sank to a mere $81 million – the lowest level seen in over a month.
The root cause of this volatility lies in low liquidity in Nigeria’s foreign exchange market. As the country focuses on building its reserves, which reached a two-year high of $39.4 billion on October 24, the limited dollar availability has increased the currency’s instability.
The nation’s inability to stabilize its currency has been ongoing since the naira was floated in June last year. The country’s struggles are compounded by the decline in oil production, which has hindered foreign exchange inflows. Finance Minister Wale Edun acknowledges the issue and emphasizes the need for increased crude output to bolster the country’s foreign reserves and strengthen the naira.
As the naira continues its downward slide, experts express concerns as the exchange rate hits a staggering ₦1,740/$1 in the parallel market. The Nigerian Autonomous Foreign Exchange Market (NAFEM) witnessed slight appreciation in the naira, suggesting that the Central Bank of Nigeria (CBN) may intervene to mitigate the pressure on the exchange rate.
