In a recent report, US-based media organization Bloomberg has predicted a continued decline for the Nigerian naira in 2024, marking its worst performance since the return to democracy in 1999. Analysts anticipate further depreciation following a 55% fall in 2023, making the naira the third worst-performing currency globally.
Bloomberg notes that the naira’s decline is attributed to factors such as the removal of the petrol subsidy by President Bola Tinubu and the resulting inflation, currently at 28.2%. The benchmark interest rate stands at 18.75%, dissuading overseas investors due to a negative real interest rate.
Foreign reserves in Nigeria are reported to be at their lowest in six years, burdened by overdue short-term overseas obligations. The naira’s 12-month contract in the non-deliverable forwards market is trading near a record low of N1,294.44 to the dollar.
The depreciation began in June 2023 when the Central Bank of Nigeria (CBN) unified all segments of the forex exchange market, allowing the currency to trade more freely. The subsequent removal of the petrol subsidy further fueled the decline.
Vetiva Capital Management Ltd suggested that unless the Tinubu administration attracts international investments or increases oil output, the naira may continue to depreciate.
Bloomberg’s prediction contrasts with the views of some local experts. Bismarck Rewane a top Nigerian economist expects Nigeria’s exchange rate to rise in 2024. Olayemi Cardoso, the apex bank governor, also projected a reduction in exchange rate pressures in the coming year..