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 latest Africa’s Pulse report.
As of August 2024, the naira had depreciated by approximately 43% year-to-date, placing it among the weakest currencies in the region, alongside the Ethiopian birr and South Sudanese pound.
The sharp decline of the naira is attributed to the soaring demand for U.S. dollars in Nigeria’s parallel market, limited dollar inflows, and slow foreign exchange disbursements by the Central Bank of Nigeria (CBN). Financial institutions, non-financial end-users, and money managers have fueled this demand for dollars, further weakening the naira.
Despite efforts by Nigeria’s government to stabilize the currency through foreign exchange market reforms, including the liberalization of the official exchange rate in June 2023, the measures have not been sufficient to stop the currency’s slide. Broader economic challenges, such as limited foreign reserves and inflationary pressures, have also contributed to the naira’s depreciation.
The World Bank’s report notes that the naira’s decline has significantly affected domestic prices, particularly for imported goods, exacerbating the financial strain on Nigerian consumers. Rising inflation, coupled with the sharp depreciation, has led to higher costs of living and increased pressure on household incomes.
However, the naira saw a modest recovery recently, appreciating by 5.69% against the U.S. dollar on October 14, improving from N1,641.27/$1 to N1,552.92/$1. Despite this positive movement, foreign exchange turnover dropped by 44.27% during the same period, indicating continued market volatility.
The World Bank projects that Nigeria’s economy will grow by 3.3% in 2024, with slight acceleration to 3.6% between 2025 and 2026 as reforms take hold. However, inflation remains a critical concern, particularly following the removal of fuel subsidies in mid-2023, which led to a tripling of gasoline prices and significantly increased transportation and logistics costs across the country.
With these economic pressures continuing to weigh on Nigeria’s financial stability, policymakers face significant challenges in stabilizing the naira and alleviating the burden on consumers.