Economic Distress Naira Becomes Global Laggard See Details 

Economic Distress Naira Becomes Global Laggard See DetailsAs Nigeria’s currency continues to struggle in the global market, financial experts warn that the Naira faces further depreciation due to ongoing economic distortions.

Yesterday, the Naira extended its decline in the parallel market, dropping to N1,710/$, down from N1,690/$ the previous day. A similar depreciation was recorded in the official market, where it fell to N1,660/$ from N1,659/$.

Earlier this week, a World Bank report listed the Naira as one of the worst-performing currencies in 2024.

David Adonri, Executive Chairman of Highcap Securities Limited, remarked: “The Naira has taken a significant hit due to persistent depreciation since its free-floating last year. However, distortions persist as the CBN continues to influence the currency’s value, undermining market mechanisms.”

Explaining the currency’s troubles, Adonri pointed to Nigeria’s economic challenges: “A severe fiscal deficit, high public debt, and dwindling forex reserves are all battering the Naira.”

To stabilize the currency, Adonri suggested, “The government must cut recurrent spending, balance the budget, and boost local production to reduce imports. There’s a clear link between inflation and the Naira’s value—addressing the supply side of the economy can curb inflation.”

Tunde Abidoye, Head of Equity Research at FBNQuest Securities, emphasized increasing crude oil production as a key measure to stabilize the Naira. He supported the World Bank’s assessment of the currency’s performance but acknowledged that the CBN, under new leadership, has made strides in improving forex market transparency.

Abidoye advised: “In the short term, we need to ramp up crude oil production to 1.8 to 2 million barrels per day. In the medium term, boosting non-oil exports and developing the service export sector are essential steps.”

Echoing this view, Nnamdi Nwizu, Co-Founder of Comercio Partners, highlighted the Naira’s 51% depreciation over the past year. “While the CBN has taken aggressive steps to tighten liquidity, I believe monetary policy has its limits. The focus now should be on fiscal policies—specifically increasing forex sources. Short-term measures include boosting crude oil output and selling off some assets, while long-term solutions involve transforming Nigeria into an export-driven economy through expanded manufacturing output.”