The naira has been listed as one of the worst-performing currencies in Sub-Saharan Africa in 2024, according to the latest Africa’s Pulsereport by the World Bank. As of August 2024, the naira had depreciated by approximately 43% year-to-date, placing it alongside the Ethiopian birr and South Sudanese pound as the region’s weakest currencies.
Several factors contributed to the naira’s depreciation, including a surge in demand for U.S. dollars in the parallel market, limited inflows of foreign currency, and delays in foreign exchange disbursements by Nigeria’s central bank. These issues have persisted despite reforms in the foreign exchange market, such as the liberalization of the official exchange rate in June 2023.
The World Bank highlighted that demand for dollars by financial institutions, money managers, and non-financial entities has exacerbated the naira’s decline. The lack of sufficient dollar inflows and slow distribution of foreign exchange to currency bureaus have further weakened the currency. While the Nigerian government introduced some market reforms, these efforts have not been enough to stabilize the naira.
The report also pointed out that the naira’s depreciation has contributed to rising domestic prices, particularly for imported goods, which has further worsened inflationary pressures on Nigerian consumers. In contrast, some African currencies that struggled in 2023, such as the Kenyan shilling and South African rand, have shown signs of recovery in 2024. The Kenyan shilling, for example, strengthened by 21% by the end of August 2024, making it one of the best-performing currencies in the region.
Despite a brief 5.69% recovery against the dollar on Monday, October 14, when the exchange rate improved from N1,641.27/$1 to N1,552.92/$1, the overall foreign exchange turnover decreased sharply by 44.27%, from $616.73 million to $343.71 million.
Looking ahead, the World Bank offered a cautious outlook on Nigeria’s economic growth, projecting a 3.3% expansion in 2024, with a slight improvement to 3.6% in 2025–2026. The report noted that inflation, which peaked at 34.2% in June 2024, had started to decelerate, reaching 32.2% in August. However, following the Nigerian government’s removal of fuel subsidies in mid-2023, gasoline prices surged, leading to increased inflationary pressures. By September 2024, gasoline prices had risen an additional 40-45%, which may cause inflation to climb again in the coming months.
Analysis:
The World Bank’s assessment of the naira’s performance paints a grim picture of Nigeria’s currency and broader economic conditions. The naira’s 43% depreciation year-to-date reflects deep-rooted structural issues in the country’s foreign exchange system and economic management. The Nigerian central bank’s inability to ensure adequate dollar inflows and the overwhelming demand for foreign currency in the parallel market highlight the country’s ongoing foreign exchange crisis.
Despite the government’s decision to liberalize the exchange rate in mid-2023, intended to ease pressure on the naira, the impact has been negligible. Dollar shortages and delays in foreign exchange disbursements have meant that financial institutions and non-financial actors alike continue to seek dollars in the black market, driving further depreciation. This situation has resulted in increased import costs, adding to the country’s already sky-high inflation, and making essential goods unaffordable for ordinary Nigerians.
Inflationary pressures have been further exacerbated by the government’s removal of fuel subsidies in 2023. Although the policy was aimed at reducing the fiscal burden of subsidies, it caused a dramatic rise in petrol prices—initially tripling and later increasing by up to 45% in 2024. These price hikes have triggered higher transportation and logistics costs, making everyday goods even more expensive. The resulting inflationary spiral, particularly in the context of stagnant wages, continues to erode the purchasing power of Nigerians.
While the World Bank projects modest GDP growth of 3.3% in 2024, these gains will likely be overshadowed by persistent inflation and currency depreciation, both of which disproportionately impact the poor and vulnerable. The removal of fuel subsidies was a necessary step in improving fiscal stability, but without accompanying policies to cushion the effects on consumers, it has worsened the economic plight of the average Nigerian.
The report also contrasts the naira’s performance with that of other African currencies, like the Kenyan shilling and South African rand, which have shown resilience and recovery. This juxtaposition underscores Nigeria’s failure to implement effective monetary policies that could stabilize the naira and protect its economy from external shocks.
In conclusion, the depreciation of the naira signals a broader economic failure, driven by foreign exchange mismanagement, delayed reforms, and weak fiscal policy. Without significant improvements in foreign exchange regulation, increased dollar inflows, and policies to alleviate inflationary pressures, Nigeria’s economic struggles will persist. For millions of Nigerians, the weakened naira means higher living costs, greater hardship, and fewer opportunities for growth in an already challenging economic environment. The government must take bold, effective steps to stabilize the currency and mitigate the impact of inflation on its people.
