The official currency of Nigeria, naira has depreciated by about 43% as of August 2024, making it one of the worst-performing currencies in Sub-Saharan Africa.
According to the World Bank’s Africa Pulse report, the Nigerian naira, along with the Ethiopian birr and South Sudanese pound, ranked as the region’s weakest currencies.
The report cited increased demand for US dollars, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s Central Bank as major factors.
“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 percent as of end-August.”
Despite foreign exchange market reforms, such as the liberalisation of the official exchange rate, the Nigerian currency continued to struggle.
The report added, “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.”
Nigeria’s inflation peaked at 34.2% in June 2024 but has since decreased to 32.2% by August. The depreciation of the naira has led to higher prices, especially for imported goods, exacerbating the burden on Nigerian consumers.
In contrast, currencies like the Kenyan shilling have shown signs of recovery, rising by 21% year-to-date by August. However, many African economies, including Nigeria, continue to experience foreign exchange shortages and exchange rate pressures.
The World Bank projects that Nigeria’s economy will grow by 3.3% in 2024, with a slight acceleration to 3.6% in 2025-26. “Economic growth in Nigeria is projected at 3.3 percent in 2024 and 3.6 percent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results,” the report stated.
Additionally, Nigeria’s inflation remains a concern, especially after the government’s decision to remove fuel subsidies in mid-2023, which caused a surge in petrol prices and subsequent inflationary effects.
The report predicted that fuel prices would increase by another 40-45% by September 2024, further raising transportation and logistics costs.
