NAIRA AMONG THE WORST PERFORMING CURRENCIES IN SUB-SAHARAN AFRICA IN 2024: WORLD BANK REPORT BREAKDOWN
1. Naira’s Depreciation in 2024
The Nigerian naira has been listed as one of the worst-performing currencies in Sub-Saharan Africa for 2024, according to the World Bank’s Africa’s Pulse report. By the end of August, the naira had depreciated by around 43% year-to-date, placing it alongside other weak currencies like the Ethiopian birr and South Sudanese pound.
2. Key Drivers of Depreciation
The significant decline in the naira's value has been driven by multiple factors:
Surge in demand for U.S. dollars: Driven by financial institutions, money managers, and non-financial end-users in the parallel market.
Limited dollar inflows: A reduced supply of dollars to the country.
Slow foreign exchange disbursements: Delays from Nigeria’s central bank in making foreign currency available to exchange bureaus.
3. Impact of Reforms
Although the Nigerian government introduced reforms like the liberalization of the official exchange rate in June 2023, these efforts have been insufficient to stabilize the currency. Economic challenges persist due to limited foreign reserves and inflationary pressures, which have made recovery difficult.
4. Economic Consequences
The naira’s depreciation has worsened inflation, particularly in prices for imported goods, further burdening Nigerian consumers. The World Bank report also highlighted that inflation reached a high of 34.2% in June 2024, slightly easing to 32.2% in August, but recent fuel price hikes are likely to reverse this trend.
5. Comparison with Other African Currencies
Interestingly, while the naira struggles, some other African currencies like the Kenyan shilling have shown signs of recovery. The shilling appreciated by 21% year-to-date by the end of August, making it one of the region’s top performers.
6. Economic Forecast for Nigeria
The World Bank offers a cautious outlook for Nigeria, projecting GDP growth of 3.3% in 2024, with a slight acceleration to 3.6% in 2025-2026. This growth is expected as a result of the gradual effects of macroeconomic and fiscal reforms.
1. Naira’s Depreciation in 2024
The Nigerian naira has been listed as one of the worst-performing currencies in Sub-Saharan Africa for 2024, according to the World Bank’s Africa’s Pulse report. By the end of August, the naira had depreciated by around 43% year-to-date, placing it alongside other weak currencies like the Ethiopian birr and South Sudanese pound.
2. Key Drivers of Depreciation
The significant decline in the naira's value has been driven by multiple factors:
Surge in demand for U.S. dollars: Driven by financial institutions, money managers, and non-financial end-users in the parallel market.
Limited dollar inflows: A reduced supply of dollars to the country.
Slow foreign exchange disbursements: Delays from Nigeria’s central bank in making foreign currency available to exchange bureaus.
3. Impact of Reforms
Although the Nigerian government introduced reforms like the liberalization of the official exchange rate in June 2023, these efforts have been insufficient to stabilize the currency. Economic challenges persist due to limited foreign reserves and inflationary pressures, which have made recovery difficult.
4. Economic Consequences
The naira’s depreciation has worsened inflation, particularly in prices for imported goods, further burdening Nigerian consumers. The World Bank report also highlighted that inflation reached a high of 34.2% in June 2024, slightly easing to 32.2% in August, but recent fuel price hikes are likely to reverse this trend.
5. Comparison with Other African Currencies
Interestingly, while the naira struggles, some other African currencies like the Kenyan shilling have shown signs of recovery. The shilling appreciated by 21% year-to-date by the end of August, making it one of the region’s top performers.
6. Economic Forecast for Nigeria
The World Bank offers a cautious outlook for Nigeria, projecting GDP growth of 3.3% in 2024, with a slight acceleration to 3.6% in 2025-2026. This growth is expected as a result of the gradual effects of macroeconomic and fiscal reforms.