The World Bank estimated that in 2022, the value of the Nigerian Naira fell by 10.2%. This occurred at a time when the nation's inflation rate in 2022 was high due to rising food and fuel prices. This was disclosed by the international bank in its most recent Africa's Pulse report for April 2023.
“Other currencies with significant losses last year include those of Sudan (23.6%), Malawi (20.7%), The Gambia (14.6%), and Nigeria (10.2%),” a statement from the bank reads in part. “Rising food and fuel prices, as well as the depreciation of the exchange rate, were the main drivers of inflationary pressures in the region, and, particularly, in countries like Ghana, Sudan, and Malawi.”
The World Bank observed that monetary policy tightening, with Nigeria raising interest rates by 650 basis points, has not resulted in a decline in the rate of inflation.
According to the report, persistent supply shocks that drive inflation, such as rising commodity prices and climatic shocks, a lack of central bank autonomy, foreign exchange distortions that widened parallel exchange rate market premia, and fiscal dominance are among the causes of monetary policy's diminished effectiveness.
According to the bank, 25% of the nations in Sub-Saharan Africa will have two-digit inflation rates in 2023. According to figures from the National Bureau of Statistics, Nigeria's headline inflation increased to 21.91% in February.
The World Bank also added that Nigeria is experiencing both high inflation and significant budget deficits. “About half of the Sub-Saharan African countries face both high inflation (low monetary policy space) and wider fiscal deficits (low fiscal policy space). “Notable cases include Ghana, Nigeria, Malawi, Zambia, and Burundi, among others.”\
The Nigerian Economic Summit Group previously estimated that in 2022, inflation would weaken the naira by 14.9%. Since 1973, the value of the naira has decreased by 10.6% yearly, according to the International Monetary Fund.