Key Insights
- Naira hits new record low beyond ₦1,043 per dollar, poised for worst yearly performance since 1999
- 55% currency collapse leaves only Lebanese pound, Argentine peso as weaker 2022 performers
- Rapid deprecation driving inflation to 17-year high while reserves hover around $37 billion
Lagos – The Nigerian naira is poised for its worst annual performance since 1999, analysts predict, as mounting economic headwinds drive further currency depreciation in 2024.
According to data compiled by Bloomberg, the naira has already collapsed 55% against the dollar this year – the steepest drop out of 151 global currencies tracked. It recently hit new record lows beyond ₦1,043 per dollar.
The declines leave only the Lebanese pound and Argentine peso as weaker performers in 2022. But unlike these currencies plagued by years of financial crisis, Nigeria’s oil-dependent economy was seen as an African powerhouse just over a decade ago.
Nigeria Mirrors Sri Lanka’s Descent as Naira Plunges 55%
Now its currency woes instead resemble economies like Sri Lanka and Pakistan that saw sharper shifts in investor confidence trigger balance of payments shortfalls and currency tailspins typically more common in wartime.
Nigeria is on the path to become the next Sri Lanka, said MarketsXplora analyst, referring to the South Asian nation that defaulted on debt this year.
Rapid naira depreciation has already seen inflation soar to a 17-year high this year, widening the current account deficit. At the same time, reserves have dwindled to a 6-year low around $37 billion, much of it already tied up in overseas obligations.
This leaves little left to defend the naira from further declines most analysts now see as inevitable in 2023 without an unexpected rise in oil exports or foreign capital inflows.
Read also! Nigeria 2024 GDP forecast cut to 3% by IMF
For ordinary Nigerians already struggling with soaring costs, more naira weakness spells deeper economic pain unless authorities can curb its fall. But as the currency breezed past ₦1,000 and now ₦1,040 per dollar milestone unhindered this year, policymakers seem left with few tools to brake its trajectory.
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