The Nigerian naira is in trouble, heading for its most significant four-day decline since January's devaluation. It plummeted 5.3% against the dollar on Tuesday, wiping out earlier gains. Despite being the top-performing currency by Bloomberg's standards, it's facing a liquidity crisis.
According to Abubakar Muhammed of Forward Marketing Bureau de Change Ltd., the unofficial market saw a 0.2% drop, continuing a four-day slide totaling 17%. The Central Bank's efforts to stabilize the naira are falling short, with foreign exchange volumes hitting a two-month low of $86 million before slightly rebounding.
Bloomberg data shows Nigeria's dollar reserves at $32 billion as of April 22, down 29% over five years, despite a marginal increase on Monday, 17 consecutive days of decline signal slow asset rebuilding.
Samir Gadio from Standard Chartered Bank suggests the recent naira rally may have been overdone, leading to a correction. Since June, the naira has lost 60% of its value against the dollar despite central bank measures.
To boost liquidity, the central bank offered dollars to Bureau de Change operators at a rate 21% below the official rate tracked by FMDQ. Analysts remain doubtful about this strategy's sustainability, predicting the naira to stabilize around 1,500 against the dollar by year-end.
