According to the World Bank, the value of the naira decreased by 10.2% in 2022.
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 cited as the worst-performing currency in the Sub-Saharan African region in 2022. It claimed that as of 2023, the currency had already lost 20% of its value.
The bank made the following statement regarding the naira: “Other currencies with significant losses last year include those of Sudan (23.6%), Malawi (20.7%), The Gambia (14.6 percent), and Nigeria (10.2 percent).”
The main causes of inflationary pressures in the region—and, particularly, in nations like Ghana, Sudan, and Malawi—were emphasized as rising food and fuel prices as well as the depreciation of the exchange rate.
The Washington-based bank observed that Nigeria’s 650 basis point rate increase as part of the tightening of monetary policy has not resulted in a decline in the inflation rate.
It was claimed that the diminished effectiveness of monetary policy can be attributed, among other things, to ongoing supply shocks that drive inflation (such as changes in commodity prices and climatic shocks), a lack of central bank autonomy, foreign exchange distortions that widened parallel exchange rate market premia, and fiscal dominance.
In 2023, the bank projects that two-digit inflation will affect 25% of the nations in Sub-Saharan Africa. According to data from the National Bureau of Statistics, Nigeria’s headline inflation increased to 21.91% in February.
The bank claims that Nigeria has a large budget deficit in addition to a high rate of inflation. It stated, “About half of Sub-Saharan African countries experience widening fiscal deficits in addition to high 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 reported that in 2022, inflation would weaken the naira by 14.9%.
