Africa’s largest economy battling currency crisis, soaring inflation

With annual inflation nearing 30 per cent and a currency in freefall, Nigeria is facing one of its worst economic crises in years, provoking nationwide outrage and protests.

The Nigerian naira hit a new all-time low against the US dollar on both the official and parallel foreign exchange markets on February 19, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year, according to CNBC.

President Bola Tinubu announced on February 20 that the federal government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilise the naira, according to multiple local media reports.

The currency is down around 70 per cent since May 2023 when Tinubu took office, inheriting a struggling economy and promising a raft of reforms aimed at steadying the ship.

In a bid to fix the beleaguered economy and attract international investment, Tinubu unified Nigeria’s multiple exchange rates and enabled market forces to set the exchange rate, sending the currency plunging. In January, the market regulator also changed how it calculates the currency’s closing rate, resulting in another de facto devaluation.

Years of foreign exchange controls have also generated enormous pent-up demand for US dollars at a time when overseas investment and crude oil exports have declined.

The country is Africa’s largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population.