The Nigerian naira recently hit a new low against the U.S. dollar, ranking among the three worst-performing currencies globally.
Nigeria's Currency Plunges as Dollar Liquidity Dries Up: Will a Naira-for-Crude Oil Swap Revive It?
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Dollar Liquidity Dries up
The Nigerian naira, which has already lost over 70% of its value in 2024, recently dropped to a record low of NGN1,670.65 per U.S. dollar on the official foreign exchange market on October 28. The naira’s decline coincides with a 72% plunge in dollar liquidity, falling to $81 million, the lowest level in over a month, according to a local publication.
This 4.3% fall for the naira represents its worst performance since October 15 and makes it one of the three worst-performing currencies globally year-to-date, according to a Businessday report citing Bloomberg data. Only the Lebanese pound and the Ethiopian birr have fared worse, the report added.
Despite Nigerian authorities cracking down on illegal foreign exchange dealers, these measures have failed to halt the currency’s decline. As previously reported by Bitcoin.com News, the naira has been named one of the worst-performing currencies multiple times in 2024.
Nigeria Hopes Local Refineries Will Boost Naira
The naira’s depreciation has fueled inflation, which peaked at 34.19% in June, further worsening the plight of Nigerians. Many young Nigerians reportedly blame the government’s economic reform agenda and recently took to the streets to express their dissatisfaction.
Meanwhile, many Nigerian observers have linked the naira’s woes to the country’s inability to generate enough foreign exchange to cover its import bill. However, officials believe the upcoming operation of the Dangote oil refinery and the government’s naira-for-crude-oil policy will likely reduce demand for dollars to buy fuel.
Nigerian President Bola Tinubu recently claimed that the government’s policy of selling locally refined fuel in local currency will help stabilize the naira.
“Whatever solution we proffer in crude oil and refined products sales in naira should not take us back to our experience in the last 40 years,” Tinubu said. “There can be cost and revenue adjustments in the oil sector, but the issue is that the government will not have to go back to the old way of doing things.”
