The World Bank predicts that the naira would be one of the worst-performing currencies in Sub-Saharan Africa in 2024.
According to the World Bank‘s recently released regional economic outlook report ‘Africa’s Pulse,’ the naira has continued to lose value, with a year-to-date devaluation of roughly 43 percent as of August.
According to the World Bank, the naira has declined due to limited dollar inflows and sluggish foreign exchange (FX) payments by the Central Bank of Nigeria to bureaus de change (BDC) operators.
The international lender also stated that the naira has been under pressure because to increased demand for dollars from financial institutions, non-financial end users, and money managers.
The World Bank said:
“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.”
“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.”
“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.”
The World Bank said despite the recovery, foreign exchange shortages and exchange rate pressures remain a significant concern for many African countries.
Furthermore, the Bretton Woods Institution forecasted a cautious prognosis for Nigeria’s economic growth, estimating that the country’s GDP will grow to 3.3 percent in 2024 and slightly higher to 3.6 percent in 2025 and 2026.
“Economic growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results. Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August,” the bank said.
The World Bank also said following the federal government’s decision to remove subsidy on premium motor spirit (PMS) in mid-2023, petrol prices surged dramatically, causing a ripple effect on inflation across the country.