One of the worst-performing currencies in Sub-Saharan Africa for 2024 is the naira.
This is in line with the most recent edition of the World Bank’s Africa’s Pulse report.
Along with the South Sudanese pound and Ethiopian birr, the naira was one of the poorest currencies in the region as of the end of August 2024, having lost almost 43% of its value year-to-date.
Delays in Nigeria’s central bank’s foreign exchange disbursements, limited dollar inflows, and the parallel market’s soaring demand for US dollars are some of the reasons behind the naira’s decline.
According to the World Bank report, demand for dollars from financial institutions, non-financial end users, and money managers has aggravated the naira’s problems.
It noted, “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region. The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 per cent as of end-August.
“Surges in demand for US dollars in the parallel market, driven 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 explain the weakening of the naira.”
This condition has lasted despite some foreign exchange market reforms implemented by the Nigerian government, such as the deregulation of the official exchange rate, which began in June 2023.
However, these attempts have so far proven insufficient to stabilize the currency.
The naira’s depreciation reflects broader economic issues in Nigeria, such as inadequate foreign currency reserves and persistent inflationary pressures.
The research also observes that the naira’s depreciation has contributed to higher domestic pricing, notably for imported items, complicating matters for Nigerian consumers.
In contrast, other African currencies that encountered issues in 2023, such as the Kenyan shilling and South African rand, are showing signs of recovery this year.
The Kenyan shilling, for example, will have risen by 21% year to date by the end of August 2024, placing it among the region’s top achievers.
Despite this, many African economies continue to face major foreign exchange shortages and exchange rate pressures.
The naira rose 5.69 percent against the dollar on Monday, according to data from the FMDQ Exchange.
The currency rate rose from N1,641.27/$1 on Friday, October 11, to N1,552.92/$1 on Monday, October 14.
Despite the naira’s recovery, foreign exchange turnover fell by 44.27 percent, from $616.73 million to $343.71 million during the same time.
The World Bank’s analysis provides a cautious view for Nigeria’s economic growth, projecting a 3.3% expansion in 2024 and a little acceleration to 3.6% in 2025-2026.
The report read: “Economic growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results. Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August.”
It further stated that after the Nigerian government decided to eliminate fuel subsidies in mid-2023, gasoline prices skyrocketed, producing a rippling effect on inflation throughout the country. According to the research, this policy move, which caused gasoline prices to treble initially, will grow by another 40-45 percent in September 2024, raising transportation and logistics expenses for both businesses and consumers.
In July 2024, inflation reached 34.2%, and while it showed indications of moderating in August, the latest spike in gasoline prices is projected to reverse this trend, perhaps pushing inflation higher in the coming months.
