AfDB Projects Naira, Cedi Fall Due to Low Export Earnings
African Development Bank (AfDB) has revealed that Nigeria’s naira and the Ghanaian cedi are among the African currencies that are expected to witness a decline this year driven by a potential fall in export earnings.
The Abidjan-based lender made this known in its 2025 economic outlook that 21 of the 54 African nations are likely to see their currencies fall in 2025 while 25 could see some gains as the global uncertainty leaves the financial markets volatile.
“Several countries—Egypt, Ethiopia, Ghana, Libya, Nigeria, Rwanda, Zambia, and Zimbabwe—are expected to experience currency depreciations of 6 percent or more,” AfDB said in its report released on Wednesday.
“The depreciation in most of these countries will be driven by the potential decline in export earnings, which could put upward pressure on national currencies.”
On the flip side, some countries like Kenya, Morocco, and those in the CFA franc zone could post appreciation in their currencies against the US dollars of more than 3 percent, the African-focused lender said.
The South African rand and Kenyan shilling have particularly been a top performer in the continent. The rand, which depreciated by 11.3 percent in nominal terms in 2023, pared those losses, appreciating by 0.7 percent year-on-year.
According to the report, the Kenyan shilling appreciated by 3.1 percent in 2024 reversing its losses of 15.4 percent.
The shilling was bolstered by improved market sentiment following successful issuance of $1.5 billion in Eurobonds to buy back the $2 billion Eurobond maturing in June 2024 and leading to a 121 percent increase in portfolio investment inflows, reversing net outflows of $233.4 million recorded in June of the previous year.
For Africa’s top oil producer, slowing oil prices is a potential downside risk for its currency that has endured steep devaluation since President Bola Tinubu removed longstanding currency controls, allowing the naira to float.
The naira lost more than 40 percent of its value last year but began to budge after the central bank rolled out a wave of reforms to restore lost confidence and transparency in the operations of the market.
CBN Governor Yemi Cardoso said this month that monetary orthodoxy is beginning to yield results, with FX market volatility dropping from 4 percent to under 0.5 percent, and reserves rising due to improved transparency and investor return.
The naira is also gaining, hovering between 1,588 and 1,611 per dollar this month, despite the global uncertainty that has left emerging markets currencies reeling from sweeping tariffs triggered by President Donald Trump.
“While exchange rate pressures have been largely driven by global factors, domestic challenges—such as misaligned foreign exchange regimes, fiscal deficit monetization, political instability, and low productivity— have also played a significant role,” AfDB said, adding that African nations must address these structural issues to further strengthen domestic macroeconomic fundamentals.
