Prominent US-based media organization, Bloomberg, delivered a sobering prediction on Friday, suggesting that the Nigerian naira is poised for further decline in 2024.
According to the publication, this projection indicates the naira’s most challenging year since the advent of democracy in 1999, with analysts foreseeing continued depreciation.
The report underscores the substantial 55 percent decline the naira has already experienced this year, reaching N1,043 per dollar at the official market as of Thursday.
This unfortunate performance places the naira as the third worst-performing currency globally, trailing behind the Lebanese pound and the Argentine peso, among the 151 currencies tracked by Bloomberg.
Drawing attention to Nigeria’s economic landscape, Bloomberg notes that the country’s foreign reserves are at their lowest point in six years, encumbered by overdue short-term overseas obligations.
Additionally, the report highlights the non-deliverable forwards market, where the naira’s 12-month contract is reportedly trading in proximity to a record low of N1,294.44 to the dollar.
The depreciation trend, as outlined by Bloomberg, commenced in June 2023 following the Central Bank of Nigeria’s decision to unify all segments of the forex exchange market, ushering in a more liberal trading environment for the currency.
Subsequently, President Bola Tinubu’s elimination of the petrol subsidy exacerbated the naira’s depreciation, contributing to the current inflation rate of 28.2 percent, coupled with a benchmark interest rate of 18.75 percent.
“The negative real interest rate has dissuaded overseas investors,” the report said.
Vetiva Capital Management Ltd, quoted in the report, shares a concerning outlook, suggesting that the naira may continue its depreciation trajectory unless the Tinubu administration attracts international investments or enhances oil output.
Interestingly, Bloomberg’s prediction contradicts the views of Bismarck Rewane, chief executive officer, who remains optimistic about a rise in Nigeria’s exchange rate in 2024.
CBN governor, Olayemi Cardoso also offers a contrasting perspective, projecting a significant reduction in exchange rate pressures in the coming year.
