The naira has been ranked among the worst-performing currencies in Sub-Saharan Africa for 2024, according to the latest edition of Africa’s Pulse, a report by the World Bank.
As of the end of August 2024, the naira had depreciated by nearly 43 percent year-to-date, positioning it alongside the Ethiopian birr and South Sudanese pound as one of the weakest currencies in the region.
Several factors have contributed to the naira’s depreciation, including a surge in demand for US dollars in the parallel market, restricted dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
The World Bank report notes that demand for dollars—driven by financial institutions, non-financial end users, and money managers—has intensified the pressure on the naira. It stated, “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the region’s worst performers. The Nigerian naira continued to lose value, with a year-to-date depreciation of about 43 percent as of the end of August.
“Elevated demand for US dollars in the parallel market, fueled by financial institutions, money managers, and non-financial end users, combined with limited dollar inflows and slow foreign exchange disbursements to currency exchange bureaus by the central bank, explains the naira’s decline.”
This situation persists despite some reforms in the foreign exchange market introduced by the Nigerian government, including the liberalization of the official exchange rate that began in June 2023.
However, these measures have not yet stabilized the currency. The naira’s ongoing struggles reflect broader economic challenges in Nigeria, such as limited foreign currency reserves and persistent inflationary pressures.
The report also highlights that the naira’s depreciation has led to rising domestic prices, especially for imported goods, further complicating the situation for Nigerian consumers.
In contrast, other African currencies that faced difficulties in 2023, like the Kenyan shilling and South African rand, have begun to recover this year. The Kenyan shilling, for example, appreciated by 21 percent year-to-date by the end of August 2024, making it one of the region’s top performers.
Despite this recovery for some currencies, foreign exchange shortages and exchange rate pressures remain significant concerns for many African economies.
The PUNCH observed that the naira appreciated by 5.69 percent against the dollar on Monday, according to data from the FMDQ Exchange. 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 plummeted by 44.27 percent, decreasing from $616.73 million to $343.71 million during the same period.
In its report, the World Bank offers a cautious outlook for Nigeria’s economic growth, projecting a 3.3 percent expansion in Gross Domestic Product for 2024, with a slight acceleration to 3.6 percent expected in 2025-2026.
The report states: “Economic growth in Nigeria is projected at 3.3 percent in 2024 and 3.6 percent in 2025–26 as macroeconomic and fiscal reforms gradually yield results. Inflation peaked in June 2024 at 34.2 percent year-on-year, then eased to 33.4 percent in July and further to 32.2 percent in August.”
It also mentions the Nigerian government’s decision to remove fuel subsidies in mid-2023, which caused gasoline prices to soar dramatically and triggered inflationary pressures across the country. The report states that this policy change, which initially tripled gasoline prices, saw further increases of 40-45 percent in September 2024, raising transportation and logistics costs for both businesses and consumers.
Inflation reached 34.2 percent in July 2024, and although there were signs of easing in August, the recent spike in gasoline prices could reverse this trend and potentially push inflation higher in the coming months.
