February 2024 FX outlook: implications of the naira’s sharp decline

Nigeria’s official currency has been caught in a tumultuous period of significant devaluation and instability. Among the nine currencies tracked on the Stears Africa FX monitor, the naira’s official rate recorded the steepest decline of 38.2% in January 2024, followed by the Ghanaian cedi (3.7%), the West African CFA Franc (2.8%) and Kenyan shilling (2.4%). Overall, the naira has lost 47% of its value in the last eight months at the official market.

The notable devaluation in the naira in the past week coincides with the issuance of several circulars by the Central Bank of Nigeria (CBN) in a concerted effort to stabilise the currency. The pivotal question we aim to address in this report is whether these recent measures can potentially reverse the naira’s current trajectory.

Challenges from the multi-market system

The naira’s current woes are intricately tied to the fallout of the six-year multi-market system. A staggering 68% loss in the official naira