Naira dips to sub-Saharan currency low in World Bank report

Onome Amuge

The Nigerian Naira has been identified as one of the worst-performing currencies in sub-Saharan Africa at the end of August 2024, according to the World Bank’s Africa’s Pulse report.

The World Bank report revealed that the Nigerian Naira has fallen to the same level of decline as the Ethiopian Birr and South Sudanese Pound, ranking among the worst-performing currencies in the sub-Saharan region as of August 2024.

The Naira’s performance in the first eight months of 2024 was among the poorest in the sub-Saharan region, depreciating by  43 percent compared to other currencies, the report showed.

The World Bank report attributed the pressure on the Naira to the high demand for dollars from several sectors of the economy, including financial institutions, non-financial end-users, and money managers.

This increased demand for the dollar, it explained, has put significant strain on the Nigerian currency, resulting in a sharp depreciation of the currency in the first eight months of 2024.

“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.

“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.

Despite efforts by the federal government to reform the foreign exchange market, including the liberalisation of the official exchange rate in June 2023, the Naira’s depreciation has continued unabated.

The reform measures have been unable to counteract the persistent demand for dollars and the limited supply of foreign exchange, leading to continued instability in the currency market.

Analysts assert that the persistent depreciation of the Naira against other currencies is symptomatic of wider economic issues in Nigeria, such as inadequate foreign currency reserves and ongoing inflationary pressures.

The devaluation of the Naira has added to the country’s economic woes, driving up prices domestically, particularly for imported goods, further stretching the already strained budgets of the average Nigerian consumer.

While the Naira’s devaluation has persisted, some African currencies that were facing difficulties in 2023, such as the Kenyan shilling and South African rand, have started to show signs of recovery in 2024.

Notably, the Kenyan shilling emerged as one of the top-performing currencies in the region, gaining 21 per cent against other currencies by the end of August 2024.

However, the World Bank report pointed out that despite this encouraging development, foreign exchange shortages and exchange rate challenges remain significant problems for many African economies, underscoring the need for ongoing efforts to strengthen their currencies and stabilise their economies.

The Naira’s woes continue to pile up as the currency weakened against the dollar on Tuesday, October 15, exchanging at N1658.97 to the dollar from N1552.92 the previous day.

Despite the Naira’s depreciation and the inflationary pressures facing Nigeria, the World Bank projected the country’s economic growth at 3.3 percent in 2024 and 3.6 percent in 2025-2026, indicating that the Nigerian economy still holds significant potential for expansion.