Nigeria: Naira hits new record low on the official market
The Nigerian naira dropped to a new record low of NGN 419.8 per USD on the official market on 14 May, following a currency devaluation. On 20 May, the naira traded at NGN 412.8 per USD, weakening 7.7% month-on-month, while the currency was down 12.7% year-on-year and 7.7% year-to-date. Meanwhile, the NAFEX rate used by investors and exporters traded at 410.7 per USD, weakening 0.3% month-on-month, 5.8% year-on-year and 4.7% year-to-date.
The devaluation of the official exchange rate was likely a move to unify the currency’s multiple exchange rates. The Central Bank devalued the currency twice in 2020, and it has traded within a band of 380.0 and 381.0 NGN per USD since last July. The naira has been under pressure from rising demand for U.S. dollars as foreign investors pulled out of the country in the wake of the global health crisis, which sent oil prices tumbling.
Looking ahead, prospects for the currency remain grim and panelists expect it to continue losing value against the greenback amid structurally high inflation, capital outflows and the Central Bank prioritizing credit growth to stimulate economic activity.