African Currencies Projected to Depreciate Amid Global Economic Uncertainty

Strategic Insights -

The African Development Bank (AfDB) has warned that the naira and 20 other African nations' currencies will depreciate by at least 6% between 2025 and 2026 due to heightened global financial market volatility. The AfDB's African Economic Outlook 2025 report highlights the growing vulnerability of African currencies to external shocks and market uncertainty. The 21 African countries expected to face currency pressures include Nigeria, Egypt, Ethiopia, Ghana, Rwanda, Zambia, Libya, and Zimbabwe, with declines largely attributed to weakening export earnings and persistent macroeconomic headwinds.

Key Takeaways:

  • The AfDB projects that 21 African countries, including Nigeria, Egypt, and South Africa, will see a minimum depreciation of 6% in their currencies between 2025 and 2026.
  • The depreciation is largely driven by global financial market volatility, weakening export earnings, and persistent macroeconomic headwinds.
  • Nigeria's Central Bank Governor, Olayemi Cardoso, has announced a significant drop in foreign exchange market volatility, now reportedly below 0.5%, citing coordinated monetary and fiscal reforms.
  • Despite the CBN's improved FX outlook, the AfDB's forecast signals caution, with countries like Kenya and Morocco expected to see currency appreciations of more than 3%.
  • In 2023, 28 African currencies depreciated, but by 2024, 17 of those countries either reversed those losses or slowed the pace of decline.
  • The AfDB recommends that African governments prioritize policies that bolster macroeconomic fundamentals, improve the value chain of exports, and implement structural reforms to reduce foreign exchange volatility.

Statistics:

  • The AfDB projects a minimum depreciation of 6% in the naira and 20 other African nations' currencies between 2025 and 2026.
  • Foreign exchange market volatility in Nigeria reported to be below 0.5%.
  • By 2024, 17 of the 28 African countries that depreciated in 2023 either reversed those losses or slowed the pace of decline.
  • Countries like Kenya and Morocco are expected to see currency appreciations of more than 3%.
  • In 2023, 28 African currencies depreciated.
  • The South African rand depreciated by 11.3% in 2023 but managed a modest 0.7% appreciation year-on-year by 2024.

Sources:

  • African Economic Outlook 2025 (published by the African Development Bank)
  • Central Bank of Nigeria (CBN) 300th Monetary Policy Committee (MPC) meeting
  • Financial Times (reported drop in foreign exchange market volatility)
  • South African Reserve Bank (2023 currency data)
  • African Development Bank (2024 currency data)