- It Will Get Worst, Says Expert
As the Central Bank of Nigeria (CBN) finetune plans to redesign some of Nigeria’s currency, the Naira at the N200, N500 and N1,000 levels, Bloomberg a leading financial, data, and media conglomerate in a report has listed the currency as one of the worst in the world.
The Bloomberg’s report noted that a 37% drop by the Naira against the Dollar in the widely-used black market has made the naira one of the world’s worst-performing currencies, after Ghana’s Cedi, which is down nearly 55% this year, and the Sri Lankan Rupee. Its peers include Sierra Leone’s Leone, which is down 36%, and the Egyptian Pound, which has lost 35%.
The reports added that while officially, Nigeria’s naira can be said to be doing pretty well this year at the official window down just 4% against a strong US dollar, ahead of the Canadian dollar and the Swiss franc, however, it is at the widely-used parallel/black market that ordinary Nigerians are suffocating.
It would be recalled that the Central Bank of Nigeria rations dollars at the official rate, cutting off access to many businesses and individuals, which in turn drives demand to the unauthorized black market. This has led to a widening gap between the managed and parallel markets to more than 90%.
While the naira officially closed at 442.75 to the dollar on Friday, currency traders on the streets of Lagos, Nigeria’s commercial hub, quoted the greenback at N890 according to Umar Salisu, a Bureau De Change (BDC) operator who tracks the data.
“Africa’s largest economy operates a tightly controlled official rate but it’s in the parallel market where the exchange rate of the local currency is largely determined by the level of demand for the dollar.
Nigeria’s Central Bank rations dollars at the official rate, cutting off access to many businesses and individuals, which in turn drives demand to the unauthorized black market. This has led to a widening gap between the managed and parallel markets to more than 90%.
That makes it one of the world’s worst-performing currencies, after Ghana’s Cedi, which is down nearly 55% this year, and the Sri Lankan Rupee. Its peers include Sierra Leone’s Leone, which is down 36%, and the Egyptian Pound, which has lost 35%, Bloomberg said.
Meanwhile, a Professor of Finance and Capital Markets at the Nasarawa State University, Nigeria has disclosed that the slump of the Naira against the dollar will continue in the near time.
“The naira’s slump is likely to continue in the near term given low oil revenue and rising outflows due to uncertainties associated with February’s presidential election, the dollar is seen as a safe haven.
It’s evident that a lot of currency substitution is going on as many people now see the greenback as a better store of value,” Uwaleke said.
It would be recalled that the naira’s free-fall escalated a day after the CBN announced that it will issue redesigned N200, N500 and N1,000 naira notes from mid-December in a bid to mop up excess cash in circulation.
The Abuja-based apex bank gave Nigerians until January 31 to exchange the existing bills for new ones, a tight deadline considering that the central bank estimates that as much as N2.7 trillion ($6.1 billion) sits outside bank vaults.
Africa’s most populous country has an average of 4.5 bank branches per 100,000 people and 45% of adults don’t have a bank account.
