Naira Ranks Among Worst Performing Currencies | Independent Newspapers Limited
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Naira Ranks Among Worst Performing Currencies

naira; banks lending; loan, devaluation
Posted: Aug 25, 2016 at 4:34 am   /   by   /   comments (0)

Kirk Leigh


The naira, Sierra Leonean Leone and Guinean franc have posted negative spot returns for currency investors in the last two months, making them the worst performing currencies in the world, according to data gleaned from Bloomberg.

Spot market returns tracked on the Bloomberg’s world currency ranker (WCRS) on August 23 indicates that the naira returned -39.43 percent to emerge the worst performing currency. Trailing the naira is the Sierra Leonean Leone with negative returns of 31.01 percent. Another African currency, the Guinean franc, delivers the third worst return of minus 18.76. It is followed by yet another African currency, the Mozambique New metical with losses of -15.43 before the entry of the Mongolian tugrik (-13.50) and Azerbaijani manat (-9.54).

According to the WCSR, Palladium is the best performing currency with returns of 33.09 percent followed by Platinum with returns of 14.89 percent. The South African Rand (ZAR), Lesotho Loti, Namibian Dollar and the Swaziland Lilangeni all produced positive returns of 12.08 percent to figure as the third best performing currencies in the world.

Naira’s inability to earn big for currency investors was noted last month by Independent when it tracked the currency performance against other African currencies. Independent reported that of the 23 African currencies monitored by Bloomberg, the naira lost the most with a 30 percent decline since middle June closely followed by Sierra Leone’s currency with loss of 29.16 percent.

In that month, the South African Rand, Botswana Pula and the Somali shilling bettered the naira. Other currencies, which dusted the naira, are Eritrean nakfa, the Tanzanian shilling and the Djiboutian franc.

The best performing African currency in the period, data further showed was the Zambian Kwacha, which gained 12.12 percent that month. The South Africa Rand gained 5.03 percent to place at a distant second, followed by the Botswana Pula with a 1.4 percent gain. Three currencies, the Egyptian Pound, Liberian Dollar and Mauritanian Rupee were stagnant in the period.

The naira suffered the worst last Thursday, with three months non-deliverable contracts climbing 4.1 percent, leading to conclusions that the currency would depreciate further on supply shortfall.

“It all comes back to liquidity, which is what drives the market,” Temi Popoola, Chief Executive Officer, Nigeria, Renaissance Capital, a United Kingdom-based investment bank, noted.

Razia Khan, chief economist for Africa at Standard Chartered Bank, had told the Financial Times in June that the country has a hefty backlog of $6 billion-$9 billion of unsatisfied foreign exchange requirements, which would be impossible to fulfill in one go without reducing foreign reserves to dangerous levels.

The Central Bank of Nigeria (CBN) in June officially devalued the naira to end the currency peg of N197-N199 set last year with the objective of curtailing imported inflation and to ease the burden of the most vulnerable Nigerians.

Bloomberg reported recently that naira forwards rose to record highs and volatility surged after the CBN removed a limit on bid-offer spreads in the foreign-exchange market, raising expectations the currency is set to extend declines as it trades more freely.