In its latest report for 2024, The Economist Intelligence Unit (EIU) has forecasted that numerous African countries, including major economies like Nigeria, will continue to witness currency depreciation. The report suggests that while the impact of devaluation in 2024 will be less severe than in the previous year, several nations are expected to be affected.
The currencies of South Africa, Nigeria, Ghana, Kenya, and Zambia experienced double-digit percentage weakening against the USD in 2023. However, Zimbabwe is predicted to be an exception among Southern African economies, with South Africa, Namibia, and Botswana expected to see moderate levels of currency depreciation.
Forecast and Analysis
“We forecast currency depreciation against the US dollar across much of Africa in 2024, although adjustments are expected to be less severe than those recorded in 2023. The Southern African economies of South Africa, Namibia, and Botswana saw their currencies lose considerable value against the US dollar in 2023, but currency stabilization appears the most likely outcome in 2024,” stated the report.
Nigeria’s Continued Struggle
The report anticipates that Egypt, Ethiopia, Angola, and Nigeria will witness a weakening of their currencies against the USD in the coming year. Concerns surround Egypt’s economic growth, downgraded by the IMF to 4.2% in 2023 from 6.7% in 2022, with potential negative impacts from renewed conflicts in Gaza affecting the vital tourism industry.
For Nigeria, the report emphasizes that the naira will face sustained pressure, attributing this to the Central Bank of Nigeria’s (CBN) promotion of unsupportive monetary policies. It highlights the CBN’s perceived lack of the necessary “firepower” to clear a backlog of forex estimated at $7 billion, causing anxiety among foreign investors.
“In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign-exchange orders, which will keep foreign investors unnerved,” the report stated.
Euro-Tied Currencies
For African countries whose currencies are linked to the Euro (CFA countries), the report notes that their currencies will fluctuate in accordance with the U.S dollar and the Euro. The dynamics of these fluctuations will likely impact these nations in the global economic landscape.
As African economies brace for potential challenges in the coming year, the EIU report serves as a crucial insight into the region’s economic landscape and the factors influencing currency movements.
