The Nigerian Naira has recovered since March, after months of persistent depreciation, and is now the best-performing fiat currency in April. The naira’s momentum can only be sustained, according to Goldman Sachs analyst Andrew Matheny, if officials continue on their current path.
Preserving the Naira’s Momentum
The Nigerian naira, which gained 12% vs the US dollar in April alone, is predicted to continue its upward trend, according to Goldman Sachs economist Andrew Matheny. The naira to US dollar exchange rate has surged, rising from a low of more than NGN1,800 per dollar in early March to just over NGN1,230 per dollar in the second week of April.
According to reports, Matheny stated that the current momentum can only be sustained provided policymakers do not stray from their current track, even though the market is seeing its first sustained rally since the Central Bank of Nigeria (CBN) abandoned the fixed exchange rate regime. Interest rate rises are among the variables that contributed to the naira’s comeback, as the article explains.
Nigerian authorities not only implemented policies that targeted traditional financial institutions but also cryptocurrency exchange platforms, which they claimed were to blame for the sharp decline in value of the naira. The Nigerian government has accused USDT dealers on Binance of causing the naira’s depreciation, as stated by Vikunews.in
Additionally, a backlog of unfulfilled dollar purchase agreements, valued at $7 billion, has been cleared by the CBN. Regarding the near-term outlook for the naira, Matheny stated:
This might certainly go farther; we could witness a continuation of the shift to 1,000 and possibly even below 1,000. It’s reassuring that after six weeks they are still holding the line.
The Tinubu Administration’s Painful Policies
The naira surged to become the best-performing currency in April as a result of the Central Bank of Nigeria (CBN) and government policies, but the Goldman Sachs analyst expressed concerns about the Nigerian government’s readiness to stick with these measures.
Some Nigerians blame Bola Ahmed Tinubu’s administration’s policies for the country’s escalating economic difficulties since it into power. The elimination of fuel subsidies, an increase in interest rates, and the depreciation of the naira are among the policy adjustments that Tinubu’s administration has implemented.
How socially sustainable this tactic will be is a matter of debate. We are not very certain that they will stick with it. The central bank’s efforts to regain credibility are still in their infancy, according to the economist.