Economic Focus: Nigerian Naira

Let’s take the Naira (₦) for example which functions as the legal tender for the Federal Republic of Nigeria. It is divided into notes called the naira with each note divided into 100 kobo (coins) and ranges from ₦5 to ₦1000. At the start of its introduction in 1973, the standard rate of exchange was £1 = ₦2 as the nation aimed to transition from the Nigerian pound and shilling which had been circulating since 1959 and still symbolized the vestiges of colonization.¹

And no, however, even though oil prices have skyrocketed (of which Nigeria is the 10th largest exporter), the current exchange rate is ₦710 to $1/£ 0.86 which is a staggering 100% depreciation in just 50 years since its introduction. For a more modernistic view, when comparing 2010-2014 against 2022,the naira has depreciated by 30.8% and faces a greater chance of further depreciation.²

Zooming Out

Against the backdrop of other currencies in the region, Nigeria’s situation is rather commonplace. Apart from the hyperinflation in Zimbabwe which has been overanalyzed by mainstream media, other nations have followed suit with Ghana (the Cedi 50% depreciated in 2022 alone), Sudan (Sudanese Pound has depreciated by 85% since 2020), Malawi (Malawian Kwacha has depreciated by 39.5% since 2020)³ etc.

Highest Performing Currencies: What are they doing right?

Among the nations with the highest performing currencies across the continent, the most crucial key to their success appears to be governmental and economic policies that spearhead development. These currencies, the Zambian Kwacha, Tunisian Dinar, Moroccan Dinar etc are in a healthy state due to specific government policies that aim to protect the currency value and reduce inflation. For example, the Libyan Dinar even though rocked by the Libyan civil war in 2011 is still one of the strongest currencies on the continent due to strict economic policies from its central bank as well as support from and proper management of its natural resources.⁴

How are African nations responding to this?

Other groups advocate for nations in different economic and cultural zones, like West African states under ECOWAS to unite under a single currency; in this case, the eco. Similarly, East African nations have plans of reuniting and reforming the East African shilling. This is intended to promote trade and promote a stronger currency as seen in the introduction of the Euro for the European Union. The efficacy of these proposals are yet to be seen as most of these plans have been postponed due to the pandemic with hopeful implementation by 2025.⁴