AfDB Projects 6% Naira Depreciation In 2025 Amid Global Uncertainty
At the backdrop of growing global financial market volatility, the African Development Bank (AfDB) has projected that the naira will depreciate by at least 6% between 2025 and 2026.
The projection was revealed in the African Economic Outlook 2025 published by the bank, highlighting the impact of global uncertainty on the stability of African currencies over the next year.
The AfDB report comes just a week after the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, announced that volatility in Nigeria’s foreign exchange (FX) market has significantly declined, dropping below 0.5%, which he attributed to improved monetary and fiscal reforms aimed at stabilizing the macroeconomic environment.
Despite the recent relative FX market stability, the AfDB report forecasts currency depreciation for 21 African nations in 2025, including Nigeria, Egypt, Ethiopia, Ghana, Libya, Rwanda, Zambia, and Zimbabwe, where depreciations of 6% or more are expected.
The bank largely attributed the depreciation trend in these countries to potential declines in export earnings, which may put upward pressure on national currencies.
Conversely, the report anticipates that currencies in Kenya, Morocco, and the CFA franc zone will appreciate by more than 3% against the US dollar, supported by stronger market fundamentals.
Looking back at 2023, the report noted that 28 African nations experienced currency depreciation, but 17 of them reversed those losses or recorded slower rates of decline.
Nigeria belongs to the category that has not recovered yet.
The AfDB report underlines the role of global factors in shaping currency trends, while also pointing to domestic challenges such as misaligned FX regimes, fiscal deficit monetization, political instability, and low productivity.
To address these systemic issues, the report recommends that African governments strengthen domestic macroeconomic fundamentals, improve export capacity through value-added production, and implement strategic policies to reduce FX volatility, which has historically resulted in high economic costs.