The naira has been listed as one of the worst-performing currencies in Sub-Saharan Africa for 2024, according to the latest edition of Africa’s Pulse, a World Bank report.
As of the end of August 2024, the naira had depreciated by approximately 43% year-to-date, placing it among the region’s weakest currencies, alongside the Ethiopian birr and South Sudanese pound.
The naira’s sharp decline is attributed to a range of factors, including surging demand for U.S. dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
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The World Bank’s report highlights that dollar demand from financial institutions, non-financial end-users, and money managers has intensified pressure on the naira.
“By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region,” the report noted. The Nigerian naira continued losing value, with a year-to-date depreciation of about 43% as of end-August.
The surge in dollar demand, combined with sluggish foreign exchange disbursements and limited inflows, has contributed to the naira’s weakening, despite foreign exchange market reforms introduced by the Nigerian government, including the liberalization of the official exchange rate in June 2023.
However, these efforts have not been sufficient to stabilize the currency. The naira’s decline reflects broader economic issues in Nigeria, such as limited foreign currency reserves and ongoing inflationary pressures.
The report also emphasizes that the naira’s depreciation has led to higher domestic prices, especially for imported goods, further worsening conditions for Nigerian consumers.
In contrast, some African currencies that faced challenges in 2023, like the Kenyan shilling and South African rand, have shown signs of recovery this year. The Kenyan shilling, for instance, strengthened by 21% year-to-date by the end of August 2024, making it one of the region’s top performers.
However, many African economies continue to face foreign exchange shortages and exchange rate pressures.
Despite these trends, the PUNCH reported a brief recovery for the naira, which appreciated by 5.69% against the dollar on Monday. Data from the FMDQ Exchange indicated that the exchange rate improved from N1,641.27/$1 on Friday, October 11, to N1,552.92/$1 on Monday, October 14.
However, foreign exchange turnover dropped significantly during this period, falling by 44.27% from $616.73 million to $343.71 million.
In its report, the World Bank projected a modest economic growth outlook for Nigeria, with the Gross Domestic Product (GDP) expected to expand by 3.3% in 2024 and slightly accelerate to 3.6% in 2025-2026.
“Economic growth in Nigeria is projected at 3.3% in 2024 and 3.6% in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results,” the report read. “Inflation peaked in June 2024 at 34.2% year-on-year and decelerated to 33.4% in July and further to 32.2% in August.”
The report also highlighted the impact of the Nigerian government’s decision to remove fuel subsidies in mid-2023, which caused a spike in gasoline prices. This policy shift initially tripled gasoline prices, and in September 2024, prices increased by another 40-45%, further driving up transportation and logistics costs.
While inflation had eased slightly by August, the recent fuel price hikes are expected to reverse this trend, potentially pushing inflation higher in the months ahead.