Naira worst performing currency in Africa, says World Bank

The World Bank has described the naira and the kwanza of Angola as the “worst performing currencies” in Africa in 2023.

The organisation said both currencies have depreciated by nearly 40 percent, noting that the decision by the Central Bank of Nigeria (CBN) to remove trading restrictions on the official market weakened the naira.

The Bank in its Africa’s Pulse released on Wednesday also explained that the Angolan kwanza declined in value because the country’s central bank stopped defending the currency.

According to the report, Angola’s central bank took the decision because of low oil prices and greater debt payments.

“Other currencies with significant losses so far in 2023 are those of South Sudan (33 percent), Burundi (27 percent), the Democratic Republic of Congo (18 percent), Kenya (16 percent), Zambia (12 percent), Ghana (12 percent), and Rwanda (11 percent),” the report reads.

The World Bank advised Nigeria and Ethiopia to halt the production of more money and also to stop providing untargeted subsidies and making foreign exchange distortions that contribute to a parallel premium.

“Central banks need to coordinate policy actions more tightly with the fiscal authorities to bring down inflation,” the bank said.

“Uncoordinated policy interventions — such as the monetary finding of fiscal deficits and the presence of foreign exchange controls — are also fueling inflation in some Sub-Saharan African countries (for instance, Ethiopia, Nigeria, and Zimbabwe),” the report further reads.

The lender cautioned Ethiopia, Ghana, Nigeria and other countries with two-digit inflation rates to avoid unorthodox interventions that might render their monetary policies ineffective.

The interventions the World Bank warned against are: “…monetarization of the fiscal deficit, direct lending interventions, untargeted subsidy programs, or foreign exchange controls”.

“If monetary and fiscal actions are not adequately coordinated to bring down inflation, the risk of de-anchoring inflation expectations would fuel further inflation, accelerate interest rate increases, and exacerbate the deceleration of economic activity,” the concluded.