The naira is one of the worst-performing currencies in Sub-Saharan Africa in 2024, according to the most recent edition of the World Bank’s Africa’s Pulse report.
Along with the South Sudanese pound and Ethiopian birr, the naira is among the worst currencies in the region as of the end of August 2024, having fallen by almost 43% year-to-date.
The naira’s slide is attributed to several factors, including Nigeria’s central bank’s delayed foreign exchange disbursements, restricted dollar inflows, and the parallel market’s soaring demand for US dollars.
According to the World Bank research, the pressure on the naira has been made worse by the demand for dollars, which has been fuelled by financial institutions, non-financial end users, and money managers.
It noted, “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 per cent 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.”
Notwithstanding many foreign exchange market changes implemented by the Nigerian government, such as the official exchange rate liberalisation that started in June 2023, this state of affairs has persisted.
These initiatives, nevertheless, haven’t been enough to stabilise the currency thus far.
The struggle of the naira is a reflection of Nigeria’s larger economic issues, like as the country’s small foreign exchange reserves and persistent inflationary pressures.