The Nigerian currency has been ranked as one of the world’s worst-performing currencies, with the naira losing 37 per cent of its value against the dollar.
According to Bloomberg, Nigeria’s naira is doing pretty well this year, down just 4% against a strong US dollar, ahead of the Canadian dollar and the Swiss franc.
But that exchange rate is used only by the government — ordinary Nigerians are grappling with a 37% drop on the widely-used black market.
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%.
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.
igeria’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%.
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 890 naira, according Umar Salisu, a bureau de change operator who tracks the data.
The local unit’s drop in the black market started a day after the central bank announced last week that it will issue redesigned 200-, 500- and 1,000-naira notes from mid-December in a bid to mop up excess cash in circulation.
Godwin Emefiele, the governor of the Central Bank of Nigeria, declared in October that new naira notes would be released by 15 December.
The Abuja-based regulator gave Nigerians until Jan. 31 to exchange the existing bills for new ones, a tight deadline considering that the central bank estimates that as much as 2.7 trillion naira ($6.1 billion) sits outside bank vaults.
However, experts have predicted that the currency’s depreciation is likely to continue in the short term given the CBN’s announcement of plans to restructure the country’s currency, the prolonged ban against BDC operators, the low oil revenue, and the increased outflows due to uncertainty surrounding the upcoming presidential election.
In order to halt the country’s currency’s rapid depreciation, the CBN in 2021 outlawed the sale of foreign exchange to BDC operators.
The central bank accused the BDCs of making illegal foreign exchange sales above the market they were authorised to serve.
Before the ban, BDC operators were an important part of the black market, assisting people who couldn’t lawfully get foreign currencies directly from the CBN to maintain their exchange rates.
With the rate at which the value of the currency is falling, experts have also predicted that before the end of the year, the naira will exchange at N1000 to the dollar.
In October, the Ghanaian cedi was rated as the worst performing currency in the world after it lost 45.1 percent of its value to the U.S. dollar this year.
