The naira lost 10.2 per cent of its value in 2022, according to the World Bank.
This came as rising food and fuel prices were responsible for high inflation in the country in 2022. The global bank revealed this in its latest Africa’s Pulse report for April 2023.
World Bank explained that the worst-performing currency in the Sub-Saharan African region was the Ghanaian cedi in 2022, which lost 40 per cent of its value in the year. It stated that the currency has already lost 20 per cent of its value so far in 2023.
Commenting on the naira, the bank said, “Other currencies with significant losses last year include those of Sudan (23.6 per cent), Malawi (20.7 per cent), The Gambia (14.6 per cent), and Nigeria (10.2 per cent).”
It stressed, “Rising food and fuel prices, as well as the depreciation of the exchange rate, were the main drivers of inflationary pressures in the region—and, particularly, in countries like Ghana, Sudan, and Malawi.”
The Washington-based bank noted that the hiking of monetary policy, with Nigeria increasing rates by 650 basis points, has not translated to a reduction in inflation rate.
It stated that the reduced effectiveness of monetary policy can be attributed, among other factors, to persistent supply shocks driving inflation (say, commodity prices and climatic shocks), lack of central bank autonomy, foreign exchange distortions that widened parallel exchange rate market premia, and fiscal dominance.
The bank says it expects 25 per cent of countries in the Sub-Saharan African region to suffer from two-digit inflation rates in 2023. In February, headline inflation in Nigeria rose to 21.91 per cent according to data from the National Bureau of Statistics.
Nigeria is suffering from both high inflation and high budget deficits, according to the bank. It said, “About half of Sub-Saharan African countries face both high inflation (low monetary policy space) and wider fiscal deficits (low fiscal policy space).
“Notable cases include Ghana, Nigeria, Malawi, Zambia, and Burundi, among others.”
In an earlier report, the Nigerian Economic Summit Group revealed that inflation weakened the naira by 14.9 per cent in 2022. According to the International Monetary Fund, the naira has been losing 10.6 per cent of its value annually since 1973.