The Nigerian naira is too weak to claim the best performing currency title in Sub-Saharan Africa as Kenyan shilling leads. The east African country’s currency gained 21 percent year-to-date by end-August 2024, according to the World Bank.
The multilateral lender in its latest Africa’s Pulse report disclosed that tighter financial conditions and a strong dollar as well as foreign exchange market reforms resulted in the weakening of most currencies in Sub-Saharan Africa in 2023.
It noted that the Angolan kwanza, Malawian kwacha, Nigerian naira, South Sudanese pound, and Zambian kwacha were the worst performing currencies in the region in 2023.
However, while some currencies have remained weakened due to foreign exchange shortages, others like the Kenyan shilling and South African rand have begun to strengthen.
“The Kenyan shilling is the best performing currency in Sub-Saharan Africa this year: it appreciated by 21 percent year-to-date by end-August 2024,” the World Bank said.
“The South African rand and currencies pegged to it have strengthened by 3.1 percent so far this year, after losing value in the past year,” it added.
Meanwhile, by end of August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were still among the worst performers in the region, according to the World Bank.
The Washington-based bank however warned that despite the fact that most currencies are stabilizing, exchange rate pressures and shortages of foreign exchange remain a concern for African policy makers
Naira plunges to 1,658.97/$ on Tuesday
The naira, on Tuesday depreciated by 6.4 percent as the dollar quoted at N1,658.97 compared to N1,552.92 on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data obtained from the FMDQ Securities Exchange Limited.
It reported a loss of N106.05 as the official foreign exchange (FX) market turnover declined by 36.62 percent at the close of trading on Tuesday.
The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 percent as of end-August, according to the World Bank.
“Surges in demand for US dollars in the parallel market, driven by financial institutions, money managers, and nonfinancial 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,” the Washington-based bank added.
The Nigerian naira’s depreciation began following the unification of the exchange rate and subsequently allowed the local unit to be determined by market forces last June.
The liberalisation of the foreign exchange segment, aimed to draw in more capital inflows badly needed to kickstart the economy, has seen the naira lose about 70 percent of its value.
“More broadly, the weakening of most African currencies resulted from foreign exchange shortages as export proceeds were subdued and international debt payments increased,” the Africa’s Pulse report stated.
Nigeria’s naira is at its cheapest in decades
Nigeria’s currency is the cheapest that it has been in decades, thanks to painful but needed economic reforms to put the nation on a long-term path to recovery.
“The naira’s real exchange rate is at its most competitive in at least 20 years,” said World Bank’s Chief Economist Indermit Gill. “This is a great opportunity for the private sector,” he told the Nigerian Economic Summit Group on Monday in the capital, Abuja.
