According to a Bloomberg report, Nigeria’s Naira was the third worst-performing currency globally in 2023.
Among 151 currencies monitored by Bloomberg, the Naira trails only the Lebanese pound and the Argentine Peso in terms of poor performance. Just 3 days before the conclusion of 2023, the Naira closed at N1,043 per $1.
African currencies dominate Bloomberg’s worst-performing list with the Angolan Kwanza, Malawian Kwacha, Zambian Kwacha, Burundina Franc, Congolese Franc, and Kenya Shilling also in the list of 10 that experienced the most devaluation in 2023 globally.
The chart illustrates the extent of depreciation these currencies experienced against the U.S. Dollar over the past year (2023). Leading the pack, the Nigerian Naira (NGN) exhibited a significant decline, registering a 55% fall.
While financial analysts have predicted that the Naira may plunge further in 2024, the Naira’s performance in 2023 has been described as its worst year since the return to democracy in 1999.
The sharp depreciation of the Naira can be attributed to the new administration’s decision, spearheaded by President Bola Tinubu, to adopt a floating exchange rate for the currency. In June 2023, the Central Bank of Nigeria (CBN) officially announced the removal of the rate cap on the Naira at the Investor’s and Exporters’ (I&E) Window of the foreign exchange market.
Moreover, shortly after assuming office in May 2023, President Tinubu took the significant step of eliminating fuel subsidies as his inaugural policy move. This decision not only propelled inflation to unprecedented levels but also had the cascading effect of devaluing the country’s currency.
Much like in Nigeria, economic challenges in Kenya were exacerbated by policies such as the removal of fuel subsidies and tax hikes.
In Malawi, the Central Bank of Malawi announced a devaluation of the local Kwacha currency’s exchange rate to the Dollar by approximately 30%, back in November 2023. The notice specified that the adjusted exchange rate for the Kwacha would be set at 1,700 Kwacha to the Dollar, compared to the previous selling rate of about 1,180 Kwacha to the Dollar.
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