“Nigeria’s Naira, Ethiopia, South Sudan Ranked Among Africa’s Worst-Performing Currencies”
As of August 2024, Nigeria’s currency, the naira, has depreciated by approximately 43%, making it one of the weakest currencies in Sub-Saharan Africa, according to the World Bank’s Africa Pulse report. Alongside the Nigerian naira, the Ethiopian birr and South Sudanese pound were also identified as among the region’s worst-performing currencies.
The report attributes the naira’s sharp depreciation to several factors, including increased demand for US dollars, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s Central Bank. Despite efforts to reform the foreign exchange market, such as the liberalization of the official exchange rate, the naira continued its downward spiral, weakening significantly throughout 2024.
The report highlights surges in dollar demand from financial institutions, money managers, and other non-financial users in the parallel market as contributing to the currency’s struggles. Limited dollar inflows and slow disbursements to exchange bureaus further compounded the issue, leading to inflationary pressures in Nigeria.
In June 2024, Nigeria’s inflation peaked at 34.2%, before slightly improving to 32.2% by August. However, the naira’s depreciation has driven up the cost of imported goods, placing an additional burden on consumers. In contrast, some currencies, such as the Kenyan shilling, showed signs of recovery, appreciating by 21% year-to-date by August. Still, many African economies, including Nigeria, continue to face foreign exchange shortages and pressures on their currencies.
Despite these challenges, the World Bank projects that Nigeria’s economy will grow by 3.3% in 2024, with slight acceleration to 3.6% in 2025 and 2026 as macroeconomic and fiscal reforms begin to take effect. However, inflation remains a key concern, particularly after the government’s removal of fuel subsidies in mid-2023, which triggered a sharp increase in petrol prices.
Looking ahead, the report predicts that fuel prices will rise by another 40-45% by September 2024, likely leading to higher transportation and logistics costs, further impacting the country’s inflation outlook.
