Details as Nigeria’s Naira Hits Rock Bottom as April’s Weakest Global Currency

The Nigerian Naira has hit a new low, sliding to 1,466.31 against the US dollar, marking its weakest point since March 20.

This downturn is primarily attributed to a notable scarcity of US dollars, with available liquidity dropping sharply to just $84 million last Thursday, according to Bloomberg.

The Naira’s performance last month categorizes it as the worst globally, triggering concerns that might prompt the Central Bank of Nigeria (CBN) to consider further interest rate hikes.

This alarming depreciation in value follows a period of relative stability and minor gains, overturning a brief positive trend. The fluctuations began after President Bola Tinubu’s administration decided to relax foreign-exchange controls last June, leading to a nearly 68% depreciation of the currency against the dollar. Razia Khan, the chief economist for Africa and the Middle East at Standard Chartered, notes that $1.3 billion worth of Naira futures set to mature by the end of the month could exacerbate market pressures, driving up the demand for dollars even further.

In response to the weakening Naira, the Central Bank of Nigeria had previously ramped up interest rates by a total of 600 basis points during their meetings in February and March. These adjustments helped the Naira recover from a low of 1,627 Naira to 1,072 against the dollar by mid-April, as the higher yields attracted investors towards local assets.

However, the currency’s strength is waning again, evident even in the unofficial market, where the Naira depreciated by 0.9% to 1,468 per dollar. The increased demand from individuals and small businesses is putting additional pressure on the currency, according to Abubakar Muhammed, CEO of Forward Marketing Bureau de Change Ltd.

Experts like Danelee Masia, a senior economist at Deutsche Bank, suggest that sluggish international investment and concerns about Nigeria’s decreasing reserves could mean the Naira remains vulnerable, especially with seasonal FX demands expected to rise in the latter half of the year. Additionally, the ongoing importation of essential commodities like oil, due to Nigeria’s limited refining capacity, continues to drain the nation’s dollar reserves.

Furthermore, Nigeria is not alone in its currency woes. Similar financial struggles are being observed in Zambia and Ghana, both undergoing debt restructuring processes that have hindered their ability to attract fresh capital, exacerbating their currency troubles.