According to reports, the Sri Lankan Rupee and Ghana’s cedi are the two worst-performing currencies in the world, with the naira of Nigeria coming in third.
It was discovered that the Egyptian pound and Sierra Leone’s Leone, both of which have lost 36% of their value, are among the peers of the naira.
According to Bloomberg, although the official exchange rate in Nigeria’s economy is strictly regulated, the demand for dollars dominates the parallel market, where the value of the local currency is largely set.
The naira is reportedly performing better than the Canadian and Swiss currencies this year, down just 4% against a strong US dollar, according to the article. However, that is not the entire tale.
Ordinary Nigerians are suffocating under a 37% decline on the widely-used black market, which most have accepted as a better benchmark for the local currency. Only the government and the wealthy utilize the official exchange rate.
Nigerian businesses and common citizens are suffering. The increase in inflation that is devouring the economy, driving up the cost of almost everything, and raising serious concerns ahead of the year-end celebrations is primarily caused by the Naira’s instability.
The main food, rice, now costs N51,000 per bag, and most people can no longer afford the prices of airline tickets.
The official exchange rate dollar rationing by Nigeria’s central bank prevents many firms and individuals from accessing the currency, which in turn drives demand to the unregulated black market and widens the difference between the managed and parallel markets to more than 90%.
Umar Salisu, a bureau de change operator who keeps track of the data, claims that although the naira officially ended at 442.75 to the dollar on Friday, currency dealers on the streets of Lagos, Nigeria’s commercial center, priced the dollar at 890 naira.
The decline in the local unit’s value on the black market began the day after the central bank said last week that it will begin issuing new 200, 500, and 1,000 naira notes in the middle of December in an effort to reduce the amount of cash in circulation.
The supreme bank of Nigeria has given Nigerians till January 31 to exchange their old bills for new ones. This is a short window of time given that the central bank believes that up to 2.7 trillion naira ($6.1 billion) may be outside bank vaults.
According to the survey, Nigeria has 4.5 bank branches per 100,000 residents on average, and 45% of adults don’t have a bank account.
According to Uche Uwaleke, a professor of finance and capital markets at the Nasarawa State University in central Nigeria, the naira’s decline is likely to continue in the near future given the low oil revenue and rising outflows brought on by the uncertainty surrounding the upcoming presidential election. The dollar is seen as a haven of safety.
As many people now view the dollar as a greater store of value, it is obvious that there is significant currency substitution taking place, Uwaleke continued.
