Nigeria’s Naira among Africa’s weakest currencies, joining Ethiopia, South Sudan
As of August 2024, the Nigerian naira has fallen by approximately 43%, making it one of the weakest currencies in Sub-Saharan Africa.
The World Bank’s Africa Pulse report indicates that the naira, along with the Ethiopian birr and South Sudanese pound, has struggled significantly due to heightened demand for US dollars, limited dollar inflows, and delays in foreign exchange disbursements from Nigeria’s Central Bank.
The report notes, “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region.”
Despite attempts to reform the foreign exchange market, including liberalizing the official exchange rate, the naira continues to experience downward pressure.
Key factors behind the naira’s depreciation include soaring demand for US dollars in the parallel market and sluggish dollar inflows, coupled with slow foreign exchange disbursements to currency exchange bureaus by the central bank.
With Nigeria’s inflation peaking at 34.2% in June 2024 and slightly easing to 32.2% by August, the naira’s decline has further exacerbated the cost of living, particularly for imported goods, adding strain to Nigerian consumers.
In contrast, other currencies, such as the Kenyan shilling, have seen a rebound, rising by 21% year-to-date as of August.
The World Bank projects a modest economic growth rate of 3.3% for Nigeria in 2024, with a slight increase to 3.6% expected for 2025-26.
However, inflation continues to be a significant concern, particularly after the government removed fuel subsidies in mid-2023, leading to a surge in petrol prices and heightened inflationary pressures.
Predictions suggest that fuel prices could rise by an additional 40-45% by September 2024, further driving up transportation and logistics costs.
Amidst this economic uncertainty, Nigeria is confronted with the dual challenge of managing currency depreciation while seeking sustainable growth in the face of persistent inflationary trends.
Proofreading by Uchechi Ojo, Sub-editor at Neptune Prime.
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