The naira has been identified as one of the poorest-performing currencies in Sub-Saharan Africa for 2024, according to the latest report from the World Bank titled Africa’s Pulse.

 By the end of August 2024, the naira had experienced a depreciation of around 43 percent year-to-date, placing it among the weakest currencies in the region, alongside the Ethiopian birr and the South Sudanese pound.

Several factors contribute to the naira's decline, including a heightened demand for US dollars in the parallel market, restricted dollar inflows, and delays in foreign exchange allocations from Nigeria’s central bank.

The World Bank report emphasizes that the demand for dollars, particularly from financial institutions, non-financial users, and money managers, has intensified the downward pressure on the naira.

The report states, “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region.

The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 percent as of end-August. Surges in demand for US dollars in the parallel market, driven by financial institutions, money managers, and non-financial end-users, combined with limited dollar inflows and slow foreign exchange disbursements to currency exchange bureaus by the central bank explain the weakening of the naira.”

Despite the Nigerian government's introduction of some foreign exchange market reforms, including the liberalization of the official exchange rate that commenced in June 2023, these measures have not yet succeeded in stabilizing the currency.

The naira's difficulties are indicative of broader economic issues in Nigeria, such as dwindling foreign currency reserves and persistent inflationary pressures.

The report highlights that the depreciation of the naira has led to increased domestic prices, especially for imported products, exacerbating challenges for consumers in Nigeria. Conversely, some African currencies that encountered difficulties in 2023, like the Kenyan shilling and South African rand, have begun to show signs of recovery this year.

Notably, the Kenyan shilling appreciated by 21 percent year-to-date by the end of August 2024, positioning it among the top performers in the region. Nevertheless, foreign exchange shortages and pressures on exchange rates continue to pose significant challenges for numerous African economies.

Interestingly, the naira experienced a 5.69 percent appreciation against the dollar on Monday, as reported by the FMDQ Exchange.

The exchange rate improved from N1,641.27/$1 on Friday, October 11, to N1,552.92/$1 on Monday, October 14. Despite this recovery, foreign exchange turnover saw a dramatic decline of 44.27 percent, dropping from $616.73 million to $343.71 million during the same timeframe.

In its analysis, the World Bank presents a cautious forecast for Nigeria's economic growth, estimating a 3.3 percent increase in Gross Domestic Product for 2024, with a slight acceleration to 3.6 percent in 2025-2026.

The report states: “Economic growth in Nigeria is projected at 3.3 percent in 2024 and 3.6 percent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results. Inflation peaked in June 2024 at 34.2 percent year-on-year, then decelerated to 33.4 percent in July and further to 32.2 percent in August.”

The report highlighted that the Nigerian government's decision to eliminate fuel subsidies in mid-2023 led to a significant spike in gasoline prices, which in turn had a widespread impact on inflation throughout the nation.

Initially, gasoline prices tripled, and by September 2024, they had risen by an additional 40-45%, resulting in increased transportation and logistics expenses for both businesses and consumers.

In July 2024, inflation peaked at 34.2%. While there were indications of a decrease in August, the recent surge in gasoline prices is anticipated to reverse this trend and could lead to further inflationary pressures in the upcoming months.