In a recent report titled “Strong Growth Amid Heated Elections and Financial Woes,” the Economic Intelligence Unit (EIU) has forecasted a substantial depreciation of the Naira by 10% or more in 2024. The report also predicts a similar fate for the domestic currencies of Egypt, Angola, Ethiopia, and Sudan, with double-digit declines anticipated.
According to the Africa Outlook 2024 report by EIU, the extent of depreciation for each currency will hinge on the macroeconomic dynamics and policies implemented by the respective nations. It emphasizes that more than 10% depreciation is likely across most African currencies relative to the US dollar in the coming year.
The report states, “We forecast currency depreciation against the US dollar across much of Africa in 2024, although adjustments are expected to be less severe than those recorded in 2023.”
The warning regarding the Naira’s downward trend aligns with earlier concerns raised by EIU, particularly after President Bola Tinubu implemented foreign exchange market convergence, abolishing all exchange rates, including the black market. Since the announcement in May, the Naira has suffered a decline of over 50% in both markets.
The report highlights the challenges faced by the Central Bank of Nigeria in meeting the foreign exchange demand backlog, contributing to the sustained pressure on the Naira. It notes, “In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved.”
Despite the grim outlook for the Naira, Bismarck Rewane, CEO of Financial Derivatives, offered a contrasting perspective at the Parthian Partners 2024 economic outlook session. He expressed expectations of Naira appreciation in the forex markets in 2024 and suggested a potential drop in inflation to as low as 17% in 2025.
