The World Bank has listed the Nigerian currency, Naira among the worst-performing currencies in Sub-Saharan Africa in 2024.
This was contained in the latest edition of Africa’s Pulse, a new report by the World Bank on Africa.
According to the Report, as of the end of August 2024, the Naira had depreciated by approximately 43 per cent year-to-date. Thus, making it one of the region’s weakest currencies alongside the Ethiopian Birr and South Sudanese Pound.
The Report stated that depreciation of the Naira is attributed to several factors. These, it said, include the surging demand for United States Dollars in the parallel market, limited Dollar inflows, and delays in foreign exchange disbursements by Nigeria’s Central Bank.
The World Bank’s report further highlights that demand for Dollars has exacerbated by pressures mounted on the Naira. It stated that the pressures on the Naira are caused by financial institutions, non-financial end-users, and money managers.
“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 per cent as of end-August.
“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.”
“This situation,” the report said, “has persisted despite some foreign exchange market reforms introduced by the Nigerian government. These include the liberalization of the official exchange rate that began in June 2023.
“However, these efforts have so far been insufficient to stabilize the currency,” it noted.
It maintained that the Naira’s struggle reflects broader economic challenges in Nigeria, including limited foreign currency reserves and ongoing inflationary pressures.
The Report also noted that the Naira’s depreciation has contributed to higher domestic prices, particularly for imported goods, compounding the difficulties for Nigerian consumers.
“In contrast,” the Report stated, “some African currencies that faced challenges in 2023 have shown signs of recovery this year. It pointed out the Kenyan Shilling and South African Rand.
According to the Report, the Kenyan Shilling, for instance, strengthened by 21 per cent year-to-date by the end of August 2024. Marking it as one of the region’s top performers.
It concluded that despite this, foreign exchange shortages and exchange rate pressures remain a significant concern for many African economies.
source: PUNCH
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