By Abiola Olawale
The latest edition of Africa’s Pulse, a report published by the World Bank, has identified the Nigerian naira as one of the worst-performing currencies in Sub-Saharan Africa for 2024.
The report, which provides a comprehensive analysis of economic trends in the region, highlights that as of the end of August 2024, the naira had depreciated by approximately 43% year-to-date.
According to the report, this places the naira alongside the Ethiopian birr and South Sudanese pound as one of the weakest currencies in the Sub-Saharan Africa region.
The report reads in part: “Ethiopia, South Sudan, and Nigeria are among the worst performing in Africa this year, and their currencies continue weakening while demand for foreign exchange remains pressing. Measures to mitigate social unrest associated with the high cost of living in Angola (doubling of the minimum wage) and Nigeria (partially reinstating fuel subsidies) are putting pressure on their public finances.”
In the comprehensive report, the World Bank said it found that the devaluation of the naira can be attributed to a combination of factors. These include a significant surge in the demand for U.S. dollars in the informal market, limited inflow of dollars, and delays in the allocation of foreign exchange by the Central Bank of Nigeria (CBN).
The World Bank specifically highlighted that the heightened demand for dollars by financial institutions, non-financial entities, and money managers has substantially increased the pressure on the naira.
“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,” the report stated.
The New Diplomat reports that this is coming not withstanding the Nigerian government’s foreign exchange market reforms, including the liberalization of the official exchange rate in June 2023, the efforts have not been sufficient to stabilize the currency.
It would be recalled that the naira plummeted to a new record low, closing at N1,700 per dollar in the parallel market on Monday. This was a 0.29% drop from its previous rate of N1,695/$1 recorded on October 11.
Also, after recording a major decrease twice consecutively, Nigeria’s headline inflation rate in September 2024 rose to 32.70%, up from 32.15% in August 2024, marking a 0.55% increase month-on-month, according to a report by the National Bureau of Statistics (NBS).
