The Nigerian naira has been listed as one of Africa’s worst-performing currencies by the World Bank, according to the global institution’s report titled ‘Africa’s Pulse: An analysis of issues shaping Africa’s economic future (October 2023 | Volume 28)’.
The report reveals that the naira has experienced a significant weakening of nearly 40% against the US dollar since its devaluation in June. Alongside the Angolan kwanza, the naira stands out as one of the region’s currencies with a year-to-date depreciation of almost 40%.
The World Bank attributes the weakening of the naira to the central bank’s decision to remove trading restrictions on the official market. As for the kwanza, its depreciation is primarily a result of low oil prices and greater debt payments, leading the central bank to halt its defense of the currency.
Other African currencies that have faced substantial losses in 2023 include the South Sudanese pound (33%), the Burundian franc (27%), the Democratic Republic of Congo franc (18%), the Kenyan shilling (16%), the Zambian kwacha (12%), the Ghanaian cedi (12%), and the Rwandan franc (11%).
The report also highlights the inflationary challenges faced by some countries in the African region due to parallel exchange market rates.
In June 2023, the Central Bank of Nigeria (CBN) directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ window of the foreign exchange market. This move aimed to allow the naira to freely float against the dollar and other global currencies.
Since this directive, the naira has depreciated from N473.83/$ to approximately N800/$ officially