Introduction
African currencies have been under pressure over the last five years due to several factors, including the COVID-19 pandemic, rising debt, geopolitical tensions, and a tight global interest rate environment. As inflation surged, central banks worldwide rapidly raised interest rates from near-zero to multi-year highs, drawing investors toward more stable securities in advanced economies. For example, between 2019 and 2024, the South African rand experienced its sharpest annual depreciation in 2021 (8.35%) and 2023 (8.14%). These were due to the spillover effects of the external shocks in 2020 and 2022 that negatively impacted the currency’s performance.
In 2024, African currencies such as the Egyptian pound and Nigerian naira were also devalued as monetary authorities aimed to liberalise exchange rate markets, reduce arbitrage opportunities, anchor exchange rate expectations, and attract investment inflows. So far in 2024, the Egyptian pound and Nigerian naira have shed 45.55% and 36.46%, respectively, significantly underperforming their
