The World Bank has said the Nigerian currency, the Naira, is among the worst-performing currencies in Africa.
In its report titled: ‘Africa’s Pulse: An analysis of issues shaping Africa’s economic future (October 2023 | Volume 28)’, tha Bank noted that the currency weakened by nearly 40% against the US dollar since a mid-June devaluation.
The US-based institution stated that, “So far this year, the Nigerian naira and the Angolan Kwanza are among the worst performing currencies in the region: these currencies have posted a year-to-date depreciation of nearly 40 per cent.
“The weakening of the naira was triggered by the central bank’s decision to remove trading restrictions on the official market. For the Kwanza, it was the decision of the central bank to stop defending the currency as a result of low oil prices and greater debt payments”.
Other currencies with significant losses so far in 2023, according to the World Bank, included South Sudan (33%), Burundi (27%), the Democratic Republic of Congo (18%), Kenya (16 per cent), Zambia (12%), Ghana (12%), and Rwanda (11%).
The Bank noted that parallel exchange market rates are also compounding inflationary problems for some countries in the African region.
Highlighting the widening difference between the parallel and official exchange rates of the naira, the bank stated that this had been the case from March 2020 until June 2023.
It said the parallel rate premium increased to 80 per cent in November 2022, and then to about 60 per cent in June 2023, as the Central Bank’s interventions to restrict foreign exchange demand and keep the exchange rate artificially low were met with declining FX supply from oil revenues.
The unification and liberalisation of the exchange rates in June 2023 allowed the NAFEX rate to converge to the parallel one, closing the gap, it said.
The Washington-based bank also highlighted that Nigeria’s growth rate would decelerate from 3.3 per cent in 2022 to 2.9 percent in 2023,
It stated that the country’s oil production had remained below OPEC+ quota, amid capacity issues and lower international oil prices; and while non-oil economic activity, particularly industry and services still supported growth, policy actions to remove fuel subsidies and unify the exchange rates might be weighing on these activities in the short-term.
The World Bank noted that activity in Nigeria’s manufacturing and services sector contracted in August. Commenting on the recent reforms of the new administration of Bola Tinubu, the global bank disclosed that purchasing power of households was expected to suffer in the short-term.
