In a recent report by the World Bank’s Africa’s Pulse, the Nigerian Naira has seen a dramatic 40% depreciation in 2023, marking it as one of the most poorly performing currencies across Sub-Saharan Africa.
This year has witnessed several other regional currencies grappling with significant losses, including the Angolan Kwanza, South Sudanese Pound, Burundian Franc, Congolese Franc, Kenyan Shilling, Zambian Kwacha, Ghanaian Cedi, and Rwandan Franc.
According to the report, “So far this year, the Nigerian Naira and the Angolan Kwanza are among the worst-performing currencies in the region, posting a year-to-date depreciation of nearly 40 percent.”
These currency losses can be attributed to a variety of factors, including uncoordinated policy interventions and foreign exchange controls. These issues have also contributed to inflation in countries like Ethiopia, Nigeria, and Zimbabwe.
Inflation has been on the rise in most Sub-Saharan African countries since 2022, making it a challenge for central banks, especially in nations with underdeveloped financial systems and poor fiscal-monetary policy coordination.
To combat these challenges, the report advises countries with high inflation rates to avoid unorthodox interventions and emphasizes the importance of coordinated monetary and fiscal policies to achieve inflation targets and ensure the stability of public finances.
Regarding current account deficits, the report projects a narrowing of the median regional current account deficit in Sub-Saharan Africa, with oil-exporting countries expected to maintain a surplus despite softer energy prices.
Nigeria’s current account is expected to improve in 2023 due to reduced imports and increased domestic refining capacity, despite lower oil earnings.
The report also highlights the economic outlook for the Sub-Saharan region, noting that growth in countries excluding major players like Angola, Nigeria, and South Africa is projected to reach 3.1 percent in 2023, with expansion expected to accelerate to 4.7 and 5.2 percent in 2024 and 2025, respectively.
However, the underperformance of Nigeria in 2024-25 is expected to hold back the economic performance of the AFW (Western and Central Africa Subregion). Nigeria’s growth is anticipated to increase from 2.9 percent in 2023 to an average rate of 3.7 percent in 2024-25, which may not be sufficient to reduce extreme poverty in the country. The growth will continue to be driven by various sectors such as services, trade, construction, manufacturing, and agriculture.
