The World Bank estimates that in 2022, the value of the naira fell by 10.2%.
This occurred at a time when the nation’s inflation rate in 2022 was high due to rising food and fuel prices. This was disclosed by the international bank in its most recent Africa’s Pulse report for April 2023.
The Ghanaian cedi, which lost 40% of its value in the year, was listed as the worst-performing currency in the Sub-Saharan African area in 2022. It claimed that as of 2023, the money has already lost 20% of its worth.
The bank made the following statement regarding the naira: “Other currencies with large losses last year include those of Sudan (23.6%), Malawi (20.7%), The Gambia (14.6%), and Nigeria (10.2 percent).”
The key causes of inflationary pressures in the region—and, specifically, in nations like Ghana, Sudan, and Malawi—were emphasized as rising food and fuel prices as well as the devaluation of the exchange rate.
The Washington-based bank observed that monetary policy tightening, with Nigeria raising interest rates by 650 basis points, has not resulted in a decline in the rate of inflation.
According to the report, persistent supply shocks that drive inflation, such as rising commodity prices and climatic shocks, a lack of central bank autonomy, foreign exchange distortions that widened parallel exchange rate market premia, and fiscal dominance are among the causes of monetary policy’s diminished effectiveness.
According to the bank, 25% of the nations in Sub-Saharan Africa would have two-digit inflation rates in 2023. According to figures from the National Bureau of Statistics, Nigeria’s headline inflation increased to 21.91% in February.
According to the bank, Nigeria is experiencing both high inflation and significant budget deficits. It stated, “Almost half of Sub-Saharan African nations experience widening budget deficits in addition to rising inflation (limited room for monetary policy)” (low fiscal policy space).
“Notable cases include, among others, those in Ghana, Nigeria, Malawi, Zambia, and Burundi.”
The Nigerian Economic Summit Group previously estimated that in 2022, inflation will weaken the naira by 14.9%. From 1973, the value of the naira has decreased by 10.6% yearly, according to the International Monetary Fund.