The sharp declines are primarily due to global economic shocks within the period, like the COVID-19 pandemic in 2020 and the Russia-Ukraine war in 2022, which triggered higher inflation, interest rates and expensive imports. More so, stiff-necked domestic FX policies (e.g. import restrictions) and lean dollar inflows in key economies like Nigeria and Kenya contributed to the currency depreciation. The chart above shows that the naira has witnessed more downward pressure than the shilling and rand.
So far this year, we’ve seen even steeper currency devaluations than last year, especially in Nigeria and Kenya, as global monetary policy tightening took centre stage, strengthening the value of the US dollar against a basket of other currencies. The naira, shilling and rand have shed 50%, 18% and 9%, respectively, compared to 2022.
As the US Fed increased interest rates by 500 basis points (bps) from near zero to 5.25%-5.50% in its 2022/23
