The Nigerian naira is experiencing its worst year since 1999. Since the beginning of 2023, the Nigerian currency has depreciated by 55%, so that $1 is now worth 1,043 naira, Bloomberg calculated (as of December 28).
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How the value of the currency has changed
< p>According to the publication, the naira showed the worst performance in the world after the Lebanese pound and the Argentine peso among 151 currencies tracked by Bloomberg. On the unofficial market, the currency is traded at 1,208 naira per dollar.
The exchange rate of the dollar to the naira over the same period increased by 100%. At the same time, the Argentine peso fell in price against the dollar on the stock exchange by 78% (the dollar exchange rate against the peso increased by 357%), and the Lebanese pound fell by almost 90% from the beginning of the year (the dollar exchange rate increased by 896%).
< p>Analysts predict further depreciation of the naira in 2024. This comes as the country's foreign exchange reserves are at their lowest levels in six years, with most of them saddled with overdue short-term foreign liabilities.
Financial services firm Vetiva Capital Management believes that unless President Bola Tinubu's government attracts international investors or increases oil production, the naira could fall further.
“Further devaluation is clear, along with monetary tightening policy is needed to reduce imbalances in the foreign exchange market,” Bloomberg quotes a senior economist at the research firm Tellimer.
The devaluation began after Nigeria’s central bank allowed currency trading more freely in June and Tinubu abandoned costly subsidies for gasoline. This, coupled with the weakening naira, led to inflation rising to 28.2%, while the benchmark interest rate remained at 18.75%.
Central Bank of Nigeria Governor Olayemi Cardoso said in mid-December that he would allow market power to determine exchange rates while establishing clear, transparent and consistent rules governing market transactions, reports Reuters.