Nigerian Naira Among Worst-Performing Currencies in Sub-Saharan Africa

Lagos, Nigeria — The Nigerian naira has been identified as one of the weakest currencies in Sub-Saharan Africa for 2024, according to the latest World Bank report, Africa’s Pulse. As of August 2024, the naira had depreciated approximately 43% year-to-date, ranking it alongside the Ethiopian birr and South Sudanese pound.

The report highlights that countries like Ethiopia, Ghana, and Nigeria are facing severe currency devaluation, exacerbated by pressing demand for foreign exchange. High costs of living in these nations have prompted measures such as Nigeria’s partial reinstatement of fuel subsidies, which are further straining public finances.

Key Factors Behind Naira Depreciation

The naira’s decline is attributed to several factors, including:

  • Increased demand for U.S. dollars in the parallel market.
  • Limited dollar inflows and delayed foreign exchange disbursements by the Central Bank of Nigeria (CBN).
  • Rising demands from financial institutions and non-financial entities, which have intensified pressure on the naira.

Despite recent reforms aimed at liberalizing the foreign exchange market, including changes implemented in June 2023, these measures have not stabilized the naira. The ongoing depreciation reflects broader economic challenges, such as dwindling foreign currency reserves and persistent inflation, which have led to higher prices for imported goods.

Impact on Inflation and Consumers

The devaluation of the naira has compounded inflationary pressures, making essentials like imported goods increasingly expensive and diminishing the purchasing power of consumers. The transportation sector, heavily reliant on imported petroleum products, has been particularly hard-hit by rising fuel prices.

Recent data shows that Nigeria’s headline inflation rate rose to 32.70% in September 2024, up from 32.15% in August. This increase has been driven largely by surges in transportation and food costs.

Market Activity and Foreign Exchange Turnover

The naira’s situation worsened on October 15, 2024, when it closed at N1,658.97 per dollar, marking a 6.39% drop from N1,552.92 the previous day. This decline was accompanied by a significant 36.62% decrease in foreign exchange turnover, falling from $343.71 million to $217.86 million, indicating reduced dollar liquidity in the market.

The naira also reached a record low in the parallel market, trading at N1,700 per dollar on October 14, 2024.

Contrasting Currency Performance in Africa

While the naira struggles, some African currencies, like the Kenyan shilling, have shown signs of recovery. The Kenyan shilling strengthened by 21% year-to-date by the end of August 2024, contrasting sharply with the naira’s decline.

The report underscores ongoing concerns about foreign exchange shortages across many African economies, which continue to impact stability and growth.

As Nigeria grapples with these economic challenges, the World Bank projects that inflation is likely to remain elevated in the coming months, complicating efforts to stabilize the economy.

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