Naira Declared Best Performing Currency, Assumes New Exchange Rate

The Nigerian naira has been declared the best performing currency in the world this month, according to a Goldman Sachs economist.

The naira’s impressive upward trajectory in the foreign exchange market has been bolstered by a notable 12% appreciation against the dollar in April.

This marks a stark contrast to its previous struggles, showcasing the currency’s remarkable resilience.

The gains come amid President Bola Tinubu’s economic reforms and strategic measures by the Central Bank of Nigeria (CBN) to stabilize the naira and strengthen the economy.

The Nigerian naira has been demonstrating resilience in the foreign exchange market, maintaining an upward trajectory and approaching the N1,000/$1 threshold. Recently, it traded at N1,120 against the dollar in the parallel market after the three-day Eid holidays. This has made the naira the world’s top-performing currency for the month, according to a Goldman Sachs economist.

The currency appreciated 12% against the dollar in April, following a 1% increase in March, marking a stark recovery from previous sharp declines. These gains have led Goldman Sachs to revise its forecast, with the possibility of the naira strengthening beyond its previous projections for 2024.

The positive momentum can be attributed to President Bola Tinubu’s economic reforms and decisive actions by the Central Bank of Nigeria (CBN) under Governor Olayemi Cardoso, including substantial interest rate hikes to attract foreign investment and alleviate the local dollar shortage.

The CBN recently issued a circular to Bureau De Change operators (BDCs), selling $10,000 to each BDC at N1,101/$1 and mandating them to sell the dollars at rates not exceeding 1.5% above the purchase price. This move is designed to boost liquidity in the retail forex market and curb arbitrage.

However, despite these policy measures, Nigeria faces challenges such as a sharp decline in foreign reserves and record-high inflation, which could hinder sustained economic growth. Economists emphasize the need for Nigeria to improve exports, increase domestic petroleum refining capacity, combat oil theft, and boost diaspora remittances to stabilize the naira in the long run.

While the recent recovery is promising, the long-term stability of the naira hinges on the effectiveness of fiscal policies and the country’s ability to increase oil exports.