The World Bank has reported that several African currencies, including the Ethiopian birr, Nigerian naira, and Sudanese pound, were among the weakest performers in the region by August 2024. The Nigerian naira experienced a significant depreciation of about 43% year-to-date according to the World Bank.
While the Kenyan shilling strengthened by over 21% during the same period, Bloomberg ranks the naira among the top 10 weakest currencies globally. Factors contributing to this weakness include volatile commodity prices, inflationary pressures, and a lack of dollar liquidity in the market.
To address the challenges posed by a weak naira, there is an opportunity for economic managers to focus on enhancing productivity in Nigeria’s real sector. By promoting large-scale production and leveraging the country’s comparative advantages, such as exporting goods, Nigeria can potentially improve its economic situation.
Efforts to strengthen the naira should also involve a strategic approach to boost exports and reduce the country’s reliance on imports. Encouraging the export of petroleum products and other goods to markets with stronger currencies can help capitalize on the currency exchange rates.
Furthermore, investing in key sectors like agriculture, agro-allied industries, education, and healthcare can contribute to a more robust economy. By enhancing infrastructure, productivity, and value addition to primary commodities, Nigeria can attract foreign investment, improve exports, and create employment opportunities for its citizens.
Overall, a holistic approach involving various stakeholders, including government officials, policymakers, and industry leaders, is essential to revitalize Nigeria’s economy and strengthen the naira.