Naira Ranks Among Best Performing Currencies in Africa

The naira, Nigeria’s currency, has been ranked the third best performing currency in Africa, according to african, a regional research hub.

The naira is currently rallying from its lowest points of the year, thanks to decisive actions taken by the Central Bank of Nigeria (CBN).

These decisions include; increasing interest rates and directly selling dollars to the foreign exchange markets.

As at April 2, 2024, the naira strengthened to N1,278/$1, a significant recovery from its February dip past N1,500, based on data obtained from the FMDQ’s website.

It strengthened further by 0.6 per cent to close at N1,255.07/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window at the close of transactions yesterday. On the other hand, it closed at N1,260/$1 at the parallel market.

Investment firm, Afrinvest had reported a 21.4 per cent rise in the naira’s value since March, marking it as one of Africa’s best performers this period.

According to African markets, Zimbabwe’s dollar stood at +301.01 per cent, the Egyptian pound stood at +52.93 per cent while Nigeria’s naira stood at +41.17 per cent, all year-to-date.

Foreign investments in Nigeria have surged to $2.1 billion this year, up from $1.6 billion which was recorded in 2023.

Similarly, according to the Nigerian Exchange Limited (NGX)’s domestic and foreign portfolio investment report for February 2024, foreign portfolio investments (FPIs) on NGX rose by 23.95 per cent to N65.81 billion from N53.11 billion recorded in January.

In President Bola Tinubu’s administration, economic policies have been shifted from fixed to market-driven exchange rates, driving this turnaround.

Post-inauguration of the President in May 2023, the exchange rate climbed from around N755 to over N1,000 by the end of the year.

This resulted in the Naira devaluing by 55 per cent, making it the world’s worst performer after the Lebanese pound and the Argentine Peso amongst 151 currencies tracked by Daily Sun in 2023.

However, reforms from the CBN such as its policy where it sells $20,000 weekly at a fixed price to Bureau De Change (BDC) operators, clearance of $2.4 billion in FX claims, increase in yields on naira-denominated assets, curbing currency speculation, raising interest rates twice and increased dollar allocations to banks, with international banks required to maintain a minimum capital of N500 billion.

Also, the CBN’s aggressive stance, including crackdowns on cryptocurrency exchanges like Binance, has played a part in stabilizing the currency.

However, protecting the naira has strained Nigeria’s forex reserves, which are crucial for servicing bonds and Treasury bills.

Analysts, including from Financial Derivatives and Goldman Sachs, have expressed confidence in CBN, whilst predicting that the Naira could stand at N1,200/$1 within a year.

Cardinal Stone also predicted possible improvements in foreign exchange reserves, highlighting the broader implications of Nigeria’s financial strategies..


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