According to a report from The Economist Intelligence Unit, several African countries, including major economies like Nigeria, are expected to undergo currency depreciation in the coming year.
The report noted that devaluation’s impact in 2024 will be less severe than that experienced in the current year.
“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,” it said.
Several nations such as South Africa, Nigeria, Ghana, Kenya, and Zambia observed double-digit percentage weakening of their currencies against the USD in 2023, Nairametrics reported.
The report noted that Zimbabwe will stand as the sole exception among the Southern African economies, with South Africa, Namibia, and Botswana expected to experience moderate levels of currency depreciation.
“The Southern African economies of South Africa, Namibia, and Botswana saw their currencies lose considerable value against the US dollar in 2023, but currency stabilization appears the most likely outcome in 2024,” it added.
Egypt, Ethiopia, Angola, and Nigeria are anticipated to witness a depreciation in the value of their currencies against the USD in the upcoming year.
It is worth noting that the IMF has revised its economic growth forecast for Egypt, projecting a growth rate of 4.2% in 2023, down from 6.7% in 2022.
Additionally, analysts caution that renewed conflicts in Gaza could have adverse effects on Egypt’s tourism industry, which is a significant contributor to its economy.
The report further outlines that Nigeria’s currency will continue to face pressure, particularly if the Central Bank of Nigeria (CBN) implements monetary policies that are deemed unsupportive.
It stressed that the CBN lacks the necessary “firepower” to clear the estimated $7 billion forex backlog, which is crucial for restoring confidence in the market.
“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,” it stated.
For African countries with currencies tied to the Euro, such as CFA countries, the report observes that their currencies will experience fluctuations in tandem with both the U.S. dollar and the Euro.