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By Milcah Tanimu
The World Bank has described the Nigerian naira as one of the worst-performing currencies in Africa, stating that it has weakened by nearly 40 percent against the US dollar since a mid-June devaluation. In a report titled ‘Africa’s Pulse: An analysis of issues shaping Africa’s economic future (October 2023 | Volume 28),’ the World Bank noted that the Nigerian naira and the Angolan kwanza are among the worst-performing currencies in the region, with both experiencing a year-to-date depreciation of nearly 40 percent.
The report attributed the weakening of the naira to the central bank’s decision to remove trading restrictions on the official market. It also mentioned that the unification and liberalization of exchange rates in June 2023 allowed the NAFEX rate to converge with the parallel market rate, closing the gap. Additionally, it noted that Nigeria’s growth rate is expected to decelerate from 3.3 percent in 2022 to 2.9 percent in 2023 due to policy actions such as the removal of fuel subsidies and the unification of exchange rates.
The World Bank highlighted that the measures taken by the incoming administration of Bola Tinubu, including the removal of fuel subsidies and devaluation of the currency, might have inflationary effects in the short term, potentially eroding the purchasing power of households and weighing on economic activity.
In summary, the World Bank’s report points out the challenges facing Nigeria’s currency and economy, including the weakening of the naira, policy changes, and their potential impact on inflation and economic activity.