Naira Falls As Worst Performing Currency of 2024 First Half
The Nigerian naira has concluded the first half of 2024 as the worst-performing currency globally, according to a Bloomberg report released on June 28. Despite a strong rally in March and April, the naira succumbed to a multitude of challenges, including devaluation, insufficient dollar liquidity, and market volatility, which thwarted the Central Bank of Nigeria’s (CBN) efforts to stabilize the currency.
A Deep Dive into the Decline
Tracking data from FMDQ, Bloomberg highlighted that the naira weakened for a ninth consecutive day, closing at ₦1,510 per dollar on June 27. This marked the longest losing streak since July 2017, bringing the year-to-date decline to a staggering 40%. Only Lebanon’s pound, amid its economic crisis and dollarisation, fared comparably poorly among the currencies tracked by Bloomberg.
A Year of Turbulence
In its March report, Goldman Sachs rated the naira as the best-performing currency of April 2024, predicting an optimistic trajectory that could see the naira exchange below ₦1,000 per dollar in the coming months. However, the currency’s performance soon defied these projections.
PricewaterhouseCoopers Limited (PwC) noted a dramatic depreciation of the naira by 67.8% from an average of ₦461.1 in May 2023 to ₦1,433.80 in May 2024. PwC’s report attributed the fall to ongoing foreign exchange market reforms by the CBN, which aimed to achieve price discovery and attract liquidity but ultimately failed to stem the tide of depreciation.
Market Volatility and Economic Impact
Bloomberg’s analysis further underscored the volatility experienced by the naira between mid-April and May, citing an imbalance between demand and supply for the dollar. This instability only improved in June when dollar inflows increased, temporarily halting the currency’s decline.
Broader Economic Context
The depreciation of the naira has significant implications for Nigeria’s economy. As the currency weakens, inflationary pressures intensify, affecting the cost of goods and services. The volatility of the naira also impacts investor confidence, potentially deterring foreign investments that are crucial for economic growth.
Central Bank’s Response
The Central Bank of Nigeria has been under immense pressure to stabilize the naira and control inflation. In response to the currency’s depreciation, the CBN has implemented several measures, including adjustments in monetary policy and interventions in the foreign exchange market. However, these efforts have yet to yield the desired results, as the underlying issues of dollar liquidity and market confidence persist.
Comparative Analysis with Other Currencies
Other African currencies, such as Egypt’s pound and Ghana’s cedi, have also recorded poor performances in the first half of 2024. However, the naira’s decline has been more pronounced, highlighting the unique economic challenges facing Nigeria.
