The Nigerian naira is having a tough time in 2024 and is considered one of the least-performing currencies in Sub-Saharan Africa.
This information comes from a report by the World Bank called Africa’s Pulse.
By the end of August 2024, the naira went down in value by about 43%. It’s one of the weakest in the area, similar to the Ethiopian birr and the South Sudanese pound.
“Ethiopia, Ghana, and Nigeria’s currencies are losing value quickly. These countries are having trouble keeping up with the need for foreign money, like U.S. dollars. Some actions to make people happier about high living costs, such as raising wages in Angola and bringing back some fuel help in Nigeria, are making their money problems bigger.”—Africa’s Pulse
Why There’s a High Demand for Dollars
There are a few reasons why naira is losing value:
- A lot of people want U.S. dollars—more than the amount available.
- The Central Bank of Nigeria is slow to give out foreign money.
- Not enough dollars are coming into the country.
The World Bank said banks and money managers are making the naira weaker because they need a lot of dollars.
- “Currencies like the Angolan kwanza and Zambian kwacha are also struggling. Generally, many African currencies are weak because exporting things is not bringing in much money, and paying back international debts is getting harder.
- “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were performing poorly. The naira lost about 43% of its value by the end of August.
- “The rush for U.S. dollars causes this. Limited dollar availability and slow currency exchange actions add to the naira’s struggle.”—reports Africa’s Pulse
Even though the Nigerian government has tried to make things better by changing how they handle foreign money, it hasn’t completely solved the naira’s problems.
The weakness of the naira is part of bigger issues in Nigeria’s economy, like low foreign money reserves and high inflation.
The report shares that weaker naira means higher prices in Nigeria, especially for things brought into the country, making life harder for people.
Meanwhile, other African currencies, such as the Kenyan shilling, are showing improvement in 2024 after having troubles in 2023.
The Kenyan shilling, for example, got stronger by 21% by the end of August, making it one of the best in the region.
But many African countries still worry about not having enough foreign money.
Key Points You Should Know
The drop in naira’s value has raised inflation, making imported things like goods and services more expensive, and reducing what Nigerians can buy.
- With weaker naira and rising fuel prices, the transportation sector, which brings in petroleum, is hit hard.
- Even with efforts to fix the economy, the World Bank says inflation in Nigeria will likely stay high soon.
- Though naira gained a little strength on Monday, it fell sharply by Tuesday due to low foreign money flow.
- Data showed naira dropped by 6.39% against the U.S. dollar from Monday to Tuesday, October 15, 2024.
This decrease came with a big drop of 36.62% in foreign money turnover from one day to the next, indicating less dollar flow, adding pressure on the naira.
It was noted that naira fell to a new low of N1,700 per dollar in the parallel market on Monday. This was a small drop from the N1,695/$1 rate a few days earlier.
Finally, after some small decreases, Nigeria’s inflation rate rose to 32.70% in September 2024, from 32.15% in August 2024, meaning prices are climbing.
The National Bureau of Statistics noted that transportation and food prices are driving this price increase.