The African Development Bank (AfDB) has predicted that Nigeria’s naira and Ghana’s cedi will weaken in 2025. This decline is expected due to a potential drop in export earnings. The AfDB’s 2025 Economic Outlook report, released on Wednesday, shows that 21 of 54 African countries may see their currencies fall this year. At the same time, 25 countries could experience some gains amid global financial market uncertainty.
Several countries including Egypt, Ethiopia, Ghana, Libya, Nigeria, Rwanda, Zambia, and Zimbabwe may face currency depreciations of 6 percent or more. The report links these losses mainly to a decline in export earnings that puts upward pressure on national currencies. However, some nations such as Kenya, Morocco, and those in the CFA franc zone might see currency appreciation of more than 3 percent against the US dollar.
The South African rand and Kenyan shilling performed well in recent years. The rand fell by 11.3 percent in 2023 but gained 0.7 percent year-on-year. The Kenyan shilling appreciated by 3.1 percent in 2024, reversing a 15.4 percent loss in 2023. This gain followed improved market confidence after Kenya issued $1.5 billion in Eurobonds to buy back a $2 billion Eurobond due in June 2024. Portfolio investment inflows rose by 121 percent, reversing the previous year’s net outflows.
Nigeria’s naira faces risks from slowing oil prices. The currency lost over 40 percent of its value last year after the government removed currency controls and allowed the naira to float. Reforms by the Central Bank of Nigeria have helped reduce foreign exchange market volatility and increase foreign reserves. Despite global uncertainty and trade tensions, the naira has remained stable between 1,588 and 1,611 per US dollar this month.
The AfDB says global factors mainly drive exchange rate pressure but domestic problems also contribute. Issues such as poor foreign exchange policies, fiscal deficits, political instability, and low productivity affect many African economies. The bank says countries need to address these structural challenges to improve their macroeconomic fundamentals and strengthen currencies.
