The Nigerian naira ranks among the worst-performing currencies in Sub-Saharan Africa in 2024, according to the World Bank’s latest Africa’s Pulse report.
Data from the report shows that as of August 2024, the naira had depreciated by approximately 43% since the beginning of the year.
This sharp decline places the naira alongside other struggling currencies in the region, including the Ethiopian birr and the South Sudanese pound.
The depreciation is primarily due to increased demand for U.S. dollars in Nigeria’s parallel market, limited dollar inflows, and reduced foreign exchange allocations by the Central Bank of Nigeria.
The report points to high demand for dollars from financial institutions, businesses, and investors as contributing factors to the naira’s weakened position.
While Nigeria undertook foreign exchange market reforms in June 2023, such as liberalizing the official exchange rate, these measures have fallen short of stabilizing the currency amid persistent economic challenges.
Broader issues, like declining foreign reserves and rising inflation, have compounded the naira’s struggles. This depreciation has notably impacted local prices, particularly for imported goods, further straining Nigerian consumers who already face high costs.
Despite these pressures, a slight recovery was observed in mid-October. The naira gained 5.69% against the dollar on October 14, moving from ₦1,641.27/$1 to ₦1,552.92/$1.
However, this improvement coincided with a sharp 44.27% drop in foreign exchange turnover, indicating potential instability in the market.
Looking ahead, the World Bank projects that Nigeria’s economy will grow by 3.3% in 2024, with modest growth expected to continue, reaching 3.6% in 2025 and 2026 as economic reforms gradually take hold.
Nevertheless, inflation remains a critical issue, worsened by the removal of fuel subsidies in mid-2023, which has tripled gasoline prices and elevated transportation and logistics costs across the nation.
