The World Bank has confirmed that the naira is among the worst-performing currencies in sub-Saharan Africa in 2024.
In its regional economic outlook report ‘Africa’s Pulse,’ released recently, the World Bank said the naira continued to lose value, with a year-to-date depreciation of about 43 percent as of August.
According to the World Bank, limited dollar inflows, and slow foreign exchange (FX) disbursements to bureaus de change (BDC) operators by the Central Bank of Nigeria (CBN) weakened the naira.
The Bank also said the demand for dollars, driven by financial institutions, non-financial end-users, and money managers, has exacerbated the pressure on the naira.
“By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region,” the report said.
“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.”
The report also notes that the naira’s depreciation has contributed to higher domestic prices, particularly for imported goods, compounding the difficulties for Nigerian consumers.
According to the report, African currencies such as the Kenyan shilling and South African rand, which weakened in 2023, stabilised or strengthened this year.
“The Kenyan shilling is the best performing currency in Sub-Saharan Africa this year: it appreciated by 21 percent year-to-date by end-August 2024,” the report further said.
“The South African rand and currencies pegged to it have strengthened by 3.1 percent so far this year, after losing value in the past year.”
The World Bank said despite the recovery, foreign exchange shortages and exchange rate pressures remain a significant concern for many African countries.
The report gave a cautious outlook for Nigeria’s economic growth, projecting that the country’s gross domestic product (GDP) will expand to 3.3 percent in 2024 and slightly increase to 3.6 percent in 2025 and 2026.
“Economic growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results.
Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August,” the bank said.
-Further petrol price increase may reverse dwindling effect of subsidy
The report also warned that a further increase in the prices of Premium Motor Spirit also known as petrol may reverse the already dwindling effects of subsidy removal in Nigeria.
The report said; “While the inflationary effects of a weakened naira in the first months of this year and the removal of the gasoline subsidy in the second half of 2023 appeared to be gradually subsiding, a further increase in gasoline prices by 40-45 per cent in September may reverse the disinflationary trend.”
“Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August,” it said, adding that the consolidation of macroeconomic reforms should support higher growth in the country in 2025.
Leave a Reply