Nigeria and Kenya are currently grappling with historic currency devaluation, experiencing the worst currency hits in over 20 years.
Despite significant growth in various industries, both countries have faced socio-economic setbacks.
The African continent as a whole has encountered a range of challenges, including the depreciation of its currencies.
While some African nations have managed to maintain the value of their currencies, several others have struggled.
A chart by Bloomberg highlighted the 10 worst-performing currencies of 2023, with seven of them belonging to African countries.
The chart reveals the extent to which these currencies have depreciated against the US dollar throughout the past year.
The Nigerian Naira (NGN) takes the lead, experiencing a staggering fall of 55%, marking the worst performance since 1999, with no signs of recovery in sight.
Bloomberg also reported that the Kenyan Shilling suffered its largest drop in the last 30 years. Factors such as rising interest rates in major economies, reduced holdings by offshore investors, and a decline in foreign-exchange inflows from exports have contributed to this decline.
To support the weakened currency, Kenya’s central bank raised its benchmark interest rate by 200 basis points to 12.5%, the largest increase since 2011, according to Bloomberg.
Foreign investors’ outflows on the Nairobi Securities Exchange amounted to 1.18 billion shillings ($7.53 million) in the three months leading up to September, compared to 1.48 billion shillings in the previous quarter, as reported by the markets regulator.
The Kenyan shilling has been under pressure, with some commercial banks in Nairobi selling US dollars beyond the Sh150 threshold. This has led to a surge in prices of imported goods, including fertilizers, electronics, and vehicles.
Nigeria’s Naira also performed poorly, ranking as the third worst-performing currency globally in 2023, according to Bloomberg.
Among the 151 currencies monitored, the Naira trails only the Lebanese pound and the Argentine Peso in terms of poor performance.
African currencies dominate Bloomberg’s list of worst-performing currencies, with the Angolan Kwanza, Malawian Kwacha, Zambian Kwacha, Burundian Franc, Congolese Franc also experiencing significant devaluation in 2023.
These currency depreciations not only signify economic instability but also contribute to a range of challenges faced by African nations. Weak currencies hinder progress in various aspects of their communities and impede opportunities for sustainable growth.
The disadvantages of underperforming currencies in African countries are interconnected and multifaceted. Many countries on the continent grapple with similar economic complications, as evidenced by the high representation of African currencies on the list.
Factors such as inflation, unstable governments, reduced foreign direct investments, drastic policy changes, and unstable capital flows have all contributed to the poor performance of these currencies.
Here are the worst-performing African currencies against the US dollar in 2023, ranked by depreciation percentage:
1. Nigerian Naira: -55.0%
2. Angolan Kwanza: -39.2%
3. Malawian Kwacha: -39.1%
4. Zambian Kwacha: -29.5%
5. Burundian Franc: -27.6%
6. Congolese Franc: -24.0%
7 Kenyan shilling -20.9
