World Bank Report Says Naira Lost 10 Per Cent of Its Value in 2022, Lists Worst Currencies in Africa
- A recent report by the World Bank said the Nigerian currency lost about 10% of its value in 2022
- The bank said high inflation rates weakened the naira’s value, leading to increased interest rate hikes by CBN
- The report also tracked other currencies in Africa and said Africa would witness two-digit inflation in 2023
According to the World Bank, the Nigerian naira lost an estimated 10.2% of its value in 2022.
The development resulted from Nigeria’s inflation rate, which hit a 17-year high at 21.34%, and rising food prices.
Devalued African currencies of 2022
The World Bank disclosed as it released its Africa’s Pulse report for April 2023.
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The Washington-based bank said other African currencies have also lost significant values in the past year.
It said the Sudanese currency lost 23.6%, Malawi 20.7%, The Gambia 14.6%, and Nigeria, 10.2%.
The World Bank said:
“Rising food and fuel prices, as well as the depreciation of the exchange rate, were the main drivers of inflationary pressures in the region, particularly in countries like Ghana, Sudan, and Malawi.”
The bank said that monetary policy restrictions, with Nigeria increasing interest rates by 650 basis points, resulted in a massive decline in the inflation rate.
Per the report, constant supply shocks driving inflation, such as increasing commodity prices and climatic shocks, and a lack of central bank independence, forex distortions that increased the parallel exchange rate market, among others, are the reasons for diminished monetary effectiveness.
The World Bank said in the report that 25% of African countries would experience two-digit inflation rates in 2023.
The National Bureau of Statistics figures say Nigeria’s headline inflation spiked to 21.91% in February 2023.
Nigeria plagued by high inflation and budget deficit
The bank also added that Nigeria is experiencing the twin problems of high inflation and a significant budget deficit.
“About half of the 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,” the report said.
BusinessInsider report said that the Nigerian Economic Summit Group had estimated that in 2022 inflation would weaken the naira by 14.9%.
Since 1973, the value of the naira has decreased by 10.6% annually, the International Monetary Fund said.
CBN makes adjustments as Naira exchanges at an all-time low against US dollar
Recall that Legit.ng reported that from all indications, the Central Bank of Nigeria (CBN) may have devalued the official Naira exchange rate against the United States dollar.
Legit.ng observed that the Nigerian currency, the Naira, has been trading at an all-time low against the dollar, above N463, since the start of the second quarter of 2023 (April 1, 2023).
This differs from the exchange rate of N461 to a dollar band recorded in recent months.
Source: Legit.ng
