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.
By the end of August 2024, the naira had depreciated by around 43% since the start of the year, placing it among the weakest currencies in the region, alongside the Ethiopian birr and South Sudanese pound.
The depreciation is linked to multiple factors, including a rising demand for U.S. dollars in the parallel market, limited dollar inflows, and delays in foreign exchange allocations by Nigeria’s central bank.
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The World Bank report also emphasizes that the surge in dollar demand from financial institutions, non-financial entities, and money managers has intensified the pressure on the naira.
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.”
Despite some foreign exchange market reforms introduced by the Nigerian government, including the liberalization of the official exchange rate in June 2023, the situation has persisted. These efforts have yet to stabilize the currency.
The naira’s continued decline highlights broader economic challenges in Nigeria, such as limited foreign currency reserves and ongoing inflationary pressures.
The report also points out that the naira’s depreciation has driven up domestic prices, especially for imported goods, exacerbating the strain on Nigerian consumers.
In contrast, some African currencies that struggled in 2023, like the Kenyan shilling and South African rand, have shown signs of recovery. By the end of August 2024, the Kenyan shilling had appreciated by 21% year-to-date, making it one of the region’s top performers.
However, foreign exchange shortages and exchange rate pressures remain pressing concerns for many African economies.
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