In a remarkable turnaround, the Nigerian Naira has gone from being the worst-performing currency in the world to the best-performing. After experiencing a staggering 12% gain in April, the Naira has rebounded from its previous lows, defying its earlier woes.
According to an economist at Goldman Sachs, as reported by Bloomberg, the Nigerian currency could continue on this recovery trajectory, provided policymakers stay on track with their current initiatives. In March, the Naira had experienced a 14% rally, climbing from its all-time low of N1,627 against the US dollar in early March to its current value of N1,230.
The Naira's resurgence is attributed to a combination of factors, including capital inflows and interest rate hikes. The Central Bank of Nigeria has implemented a series of positive fiscal policies, including 600 basis points of cumulative interest rate increases at policy meetings in February and March. These measures, along with initiatives to alleviate the local dollar scarcity that had fueled volatility, have contributed to the Naira's remarkable recovery.
Goldman Sachs remains optimistic about the Naira's future, with the investment bank forecasting that the currency could potentially drop to N1,000 or even below against the US dollar as the central bank's policies continue to take effect.
"This probably can run further; we would see an extension of the move to 1,000 and maybe even sub-1,000," said Goldman's Andrew Matheny. "Six weeks have gone by and they're continuing to hold the line, so that's encouraging."
The turnaround is a significant achievement for the Nigerian economy, which had previously grappled with the Naira's status as the worst-performing currency in the world. The implementation of bold economic reforms, such as the removal of fuel subsidies and the
floating of the currency, had initially impacted the country's inflation and economic stability.
However, the current policies appear to be paying dividends, propelling the Naira's remarkable transformation from the worst to the best-performing currency.