Naira Among Worst-Performing Currencies, World Bank Warns
In a concerning warning, the World Bank has cautioned that a further increase in the prices of Premium Motor Spirit, also known as petrol, may reverse the already dwindling effects of subsidy removal in Nigeria. According to the October edition of its Africa’s Pulse report, the World Bank notes that the naira has been listed among the worst-performing currencies in Sub-Saharan Africa in 2024.
The warning comes on the heels of the removal of petrol subsidies in Nigeria, which was officially pronounced by President Bola Tinubu in May 2023. The move led to a surge in PMS prices from N175 per litre to over N1000 across the country. The World Bank’s report warns that a further increase in gasoline prices by 40-45 per cent in September may reverse the disinflationary trend.
The report also highlights that economic growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025-26 as macroeconomic and fiscal reforms gradually start yielding results. However, the naira has been depreciating sharply, with a year-to-date depreciation of approximately 43 per cent as of the end of August, making it one of the region’s weakest currencies alongside the Ethiopian birr and South Sudanese pound.
The depreciation of the naira is attributed to several factors, including surging demand for United States dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank. The World Bank’s report notes that demand for dollars, driven by financial institutions, non-financial end-users, and money managers, has exacerbated the pressure on the naira.
In the face of these challenges, the World Bank is urging policymakers in Nigeria to consolidate macroeconomic reforms to support higher growth in 2025. With the naira ranking among the worst-performing currencies in Sub-Saharan Africa, the World Bank’s warning serves as a stark reminder of the need for urgent action to stabilize the country’s economy.
