Photo Credit: Vanguard

In a recent report titled, ‘Africa’s Pulse: An analysis of issues shaping Africa’s economic future (October 2023 | Volume 28),’ the World Bank has listed the Nigerian naira among the worst-performing currencies on the African continent, with a staggering 40% depreciation against the United States dollar since its devaluation in June.

This significant depreciation was triggered by the Central Bank of Nigeria’s (CBN) decision to remove trading restrictions on the official market. The naira’s fall from N473.83/$ to approximately N800/$ officially since June 2023 has raised concerns about the country’s economic stability.

The naira is not alone in its struggles, as the Angolan kwanza also faces a similar plight, with a year-to-date depreciation of nearly 40%. For Angola, the central bank’s decision to stop defending the currency due to low oil prices and increased debt payments played a pivotal role in its currency’s decline.

The World Bank’s report sheds light on other African currencies that have experienced significant losses in 2023, including South Sudan (33%), Burundi (27%), the Democratic Republic of Congo (18%), Kenya (16%), Zambia (12%), Ghana (12%), and Rwanda (11%). The parallel exchange market rates are exacerbating inflationary challenges in several African countries.

The CBN’s directive in June 2023, instructing Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ window of the foreign exchange market and allow the free float of the naira against the dollar and other global currencies, has raised concerns about the naira’s stability and its impact on the Nigerian economy.

As the naira’s depreciation continues to be a cause for worry, experts and policymakers will closely monitor the situation to mitigate the potential economic repercussions on Nigeria and the broader African region.

Credit: Vanguard