Nigeria’s Naira is one of Africa’s low-performing currencies so far in 2021 after dropping 2.85 percent of its value against the United States dollar in the forex market.
The Naira closed at 393.4 to a dollar on Friday compared to 382 to a dollar recorded on January 1, according to data compiled by www.exchange-rates.org, a currency tracking website.
Among the 28 countries surveyed, Nigeria is only behind Libyan Dinars, which came first among the worst performing African currencies since the beginning of the year.
It shed 228.8 percent in value against the dollar from 1.35335 a dollar on January 1 to 4.44985 as at January 5.
The strength of a currency is determined by a number of factors, including its supply and demand, market forces within the country, inflation, and the foreign exchange market.
The US dollar is considered one of the strongest currencies in the world and is therefore, an appropriate benchmark with which to measure the strength of some African currencies.
Guinea Francs came in third after its value dropped by 1.23 percent from 10,111.43 in January 1 to 10,236.61 during the period under review.
CFA Franc (XOF) and Cape Verde Escudos currencies completed the list of top five worst-performing currencies against the dollar after shedding 0.69 percent in value to close at 544.38976 and 91.51078 respectively.
The two currencies traded at 540.61202 and 90.87575 on January 1.
South African Rands on the other hand depreciated by 0.39 percent against the dollar during the period.
On the flip side, in 36 days period, data by exchange rates also showed that currencies of African top economies all recorded gains against the dollars at different levels.
Angola Kwanza gained 1.2 percent to close at 651.78 after starting the year at 659.75 to a dollar.
The Egyptian Pound also strengthened by 1.35 percent from 15.89 to a dollar on January 1 to close at 15.68 to a dollar as at February 1.
Ghanaian Cedis, Kenyan Shillings and Rwanda Francs also appreciated in value against dollars by 2.72 percent, 1 percent, and 1.56 percent respectively.
On February 5, the exchange rate between the naira and the dollar appreciated after closing at N396.17/$1 at the NAFEX (I&E Window) where forex is traded officially.
While on the parallel market, Aboki FX showed the naira exchanged for the dollar at N480/$1 unchanged from the previous day’s trading.
The Naira’s free fall against the dollar has become a source of concern to the Central Bank of Nigeria (CBN) as FX demand pressure continues.
With oil price reaching $60 per barrel and expected to shore up Nigeria’s external reserves, Naira is expected to bounce back and reverse the slide occasioned by the fall in oil price at the international market and the COVID-19 pandemic.