The naira is one of 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, as of August 2024, the naira had depreciated by 43% year-to-date, placing it among the weakest currencies in the region, alongside the Ethiopian birr and South Sudanese pound.
The naira’s sharp decline has been attributed to surging demand for U.S. dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
Financial institutions, money managers, and non-financial end-users have driven the demand for dollars, adding to the pressure on the currency.
Despite the Nigerian government’s efforts to stabilise the naira by liberalizing the official exchange rate in June 2023, the currency has continued to struggle.
The depreciation has worsened inflation, particularly for imported goods, and has increased costs for Nigerian consumers.
The report notes that while some African currencies, such as the Kenyan shilling, have shown recovery this year, the naira remains under significant strain, reflecting broader economic challenges in Nigeria, including low foreign reserves and ongoing inflationary pressures.
In a slight improvement, the naira appreciated by 5.69% against the dollar on October 14, moving from N1,641.27/$1 on Friday to N1,552.92/$1 on Monday.
However, foreign exchange turnover dropped by 44.27% during this period, indicating continued volatility.
Looking ahead, the World Bank projects Nigeria’s economy will grow by 3.3% in 2024, with expectations of 3.6% growth in 2025-2026 as reforms start to take effect.
However, inflation remains a challenge, spiking at 34.2% in mid-2024 before easing slightly in the following months. Fuel price hikes, following the removal of subsidies, have added to inflationary pressures and could reverse recent gains.
The naira’s persistent decline highlights the ongoing financial and economic struggles facing Nigeria as it continues to grapple with foreign exchange challenges and inflation.
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