The naira has been ranked among the worst-performing currencies in Sub-Saharan Africa for 2024, according to a new World Bank report in Africa’s Pulse. By the end of August 2024, the naira had depreciated by roughly 43% year-to-date, joining the Ethiopian birr and South Sudanese pound among the region’s weakest currencies.
The decline has been driven by a high demand for U.S. dollars in the parallel market, limited dollar inflows, and delays in foreign exchange (FX) disbursements by the Central Bank of Nigeria (CBN). Following the June 2023 directive by President Tinubu, the CBN ended its control of the FX market, unifying the naira exchange rates to allow market forces to determine the currency’s rate. Instead of stabilizing the currency as intended, the naira’s value has plummeted, with the gap between official and parallel market rates widening further.
The World Bank report points out that Nigeria’s struggling economy, exacerbated by high inflation, unstable commodity prices, and low dollar liquidity, has left it vulnerable alongside other African currencies, including Zambia’s kwacha and Angola’s kwanza. Currently, the government’s heavy import reliance, excessive borrowing, and luxury spending habits are adding to the pressure on the economy, forcing a re-evaluation of the naira floatation policy.
For a more stable exchange rate and currency recovery, the report recommends:
- Attracting foreign investment and improving business conditions by addressing the nation’s energy and infrastructure challenges.
- Reducing dependency on imports and boosting local production, especially in food and SMEs.
- Cutting down on luxury imports among government officials to ease the economic burden on the naira.
With Nigeria’s economic fundamentals insufficient to support a free-floating currency, experts now urge the government to reconsider and adjust the policy before the economic toll deepens, potentially driving more multinational companies out of the Nigerian market.
