Bloomberg Outlook: Naira’s Downward Spiral to Persist in 2024 with No Recovery on the Horizon

In a recent market analysis, the US-based media giant Bloomberg L.P has predicted an enduring depreciation of the Naira throughout 2024, marking a notable downturn that is expected to be the most severe since 1999. According to Bloomberg’s comprehensive market evaluation, the Naira has witnessed a staggering 55% decline over the course of the year, settling at approximately 1,043 per dollar as of the latest Thursday update.

This places the Naira at the bottom among 151 global currencies tracked by Bloomberg, trailing only the Lebanese pound and the Argentine peso in terms of poor performance.

Infostride News has further gathered from Nairametrics’ daily FX watch that the Naira experienced a new low against the dollar on Thursday, December 28th, 2023, at the official market, registering at N1,043.09 per dollar. This marks a significant depreciation of 16.35% compared to its previous closing rate, presenting a worrisome trend just three days before the onset of 2024. Additionally, this decline signifies the second instance where the Naira has surpassed the N1,000/$ threshold, raising concerns about the potential repercussions on the economy.

The market analysis also sheds light on the foreign reserve situation, indicating that it has reached a six-year low, primarily due to pending short-term overseas obligations. Infostride News notes that the Central Bank’s annual financial statement, published in August, references two securities lending agreements with JP Morgan Chase & Co. totaling $7 billion in 2021, along with two agreements of $500 million each with Goldman Sachs Group Inc. JP Morgan’s estimates of Nigeria’s net FX Reserve hover around $3.7 billion, significantly lower than the net figure of $14 billion reported at the close of 2021.

JP Morgan stated, “Based on partial information from the audited financial accounts, we estimate that CBN’s net FX reserves were around US$3.7 billion at the end of last year, from US$14.0 billion at the end of 2021,” underlining the concerning decline in the country’s foreign reserves.

Addressing the situation, Infostride News emphasizes that the devaluation of the Naira is linked to President Bola Tinubu’s reforms, particularly the ongoing unification process of the foreign exchange rate. Financial experts at Vetiva Capital Management Ltd. express concern that unless President Bola Tinubu’s administration can attract international investors or bolster oil production, the Naira’s decline may persist. Patrick Curran, a senior economist at Tellimer Ltd, concurs, stating, “It’s clear that further devaluation — alongside tighter monetary policy — is needed to reduce imbalances in the FX market.”

Furthermore, the market analysis suggests potential remedies, noting that a substantial increase in external reserves, a material rise in foreign exchange inflows, and a reduction in money supply could positively impact the currency. The complexities of Nigeria’s economic landscape underscore the need for comprehensive measures to address the multifaceted challenges contributing to the Naira’s declining fortunes in the global market. Infostride News remains committed to providing updates and insights into the evolving economic scenario in Nigeria and around the world.