The naira lost 10.2 per cent of its value in 2022, according to the World Bank.
This came as rising food and fuel prices were responsible
for high inflation in the country in 2022. The global bank revealed this in its
latest Africa’s Pulse report for April 2023.
It explained that the worst-performing currency in the
Sub-Saharan African region was the Ghanaian cedi in 2022, which lost 40 per cent
of its value in the year. It stated that the currency has already lost 20 per
cent of its value so far in 2023.
Commenting on the naira, the bank said, “Other currencies
with significant losses last year include those of Sudan (23.6 per cent),
Malawi (20.7 per cent), The Gambia (14.6 per cent), and Nigeria (10.2 per
cent).”
It stressed, “Rising food and fuel prices, as well as the
depreciation of the exchange rate, were the main drivers of inflationary
pressures in the region—and, particularly, in countries like Ghana, Sudan, and
Malawi.”
The Washington-based bank noted that the hiking of monetary
policy, with Nigeria increasing rates by 650 basis points, has not translated
to a reduction in inflation rate.
It stated that the reduced effectiveness of monetary policy
can be attributed, among other factors, to persistent supply shocks driving
inflation (say, commodity prices and climatic shocks), lack of central bank
autonomy, foreign exchange distortions that widened parallel exchange rate
market premia, and fiscal dominance.
The bank says it expects 25 per cent of countries in the
Sub-Saharan African region to suffer from two-digit inflation rates in 2023. In
February, headline inflation in Nigeria rose to 21.91 per cent according to
data from the National Bureau of Statistics.
Nigeria is suffering from both high inflation and high
budget deficits, according to the bank. It said, “About half of Sub-Saharan
African countries face both high inflation (low monetary policy space) and
wider fiscal deficits (low fiscal policy space).
“Notable cases include Ghana, Nigeria, Malawi, Zambia, and
Burundi, among others.”
In an earlier report, the Nigerian Economic Summit Group
revealed that inflation weakened the naira by 14.9 per cent in 2022. According
to the International Monetary Fund, the naira has been losing 10.6 per cent of
its value annually since 1973.
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