African currencies had a rough performance in 2023 as most of them plunged to a record low. Most currencies in the continent ended the year in the red against the US dollar, British pound, and the euro. This happened as the dollar shortage ravaged the economy and as foreign investors pulled their funds.
African currencies were not the only ones in the red. In South America, the Argentinian peso plummeted to a record low as inflation continued rising. The election of Javier Milei, who has vowed to dollarize the economy has not helped. In Turkey, the lira has plummeted even as the CBRT hiked rates substantially.
In India, the Indian rupee also moved to a record low against the US dollar. Other currencies like the Pakistani rupee, Chinese yuan, Indonesian rupiah, and the Sri Lankan rupee continued falling.
Ethiopian birr crash
The Ethiopian birr has been in a freefall as the economy continues going through a rough patch. The USD/ETB exchange rate surged to a record high of 56, higher than 53.25, where it started the year. It has risen by more than 99% from the lowest point in 2018.
The currency crashed as concerns about the economy continued. While the long-running war has ended, Ethiopia has struggled to attract foreign capital in the past few months. At the same time, the country has gone through a major dollar shortage that pushed it to default on $33 million of foreign debt.
Ethiopia is now negotiating with its creditors as it seeks to extend its repayment schedule. This is in line with what other countries like Zambia and Ghana have done in the past few months. Such a deal will not necessarily save the Ethiopian birr. For example, the Zambian kwacha and the Ghanaian cedi are still retreating.
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Ethiopian birr vs USD
The Nigerian naira also had a rough performance in 2023. The official USD to naira rate started the year at 450 and ended the year at about 900. Worse, the black market rate has slumped to 1,300.
The Nigerian naira plunged for several reasons. First, there was the botched rollout of the new generation notes in the first half of the year that led to a currency shortage. Second, the currency plunged ahead of the general election.
Third, the new government moved to unpeg the currency in a bid to narrow the official and black market rates. Finally, its decision to remove subsidies led to higher inflation, which devalued the currency further.
Most recently, the government’s decision to invade Aliko Dangote’s offices have contributed to the sell-off. Analysts believe that the situation, which some see as retribution, could erode investor confidence in the economy.
In line with this, Dangote’s refinery has seen expensive delays in the past few months. It is unclear whether the government will supply the refinery with enough crude oil.
USD to Nigerian naira
Zimbabwe dollar crash
Down south, the Zimbabwean dollar has continued melting this year. The currency, which is known for its volatility, has crashed by over 40% this year alone as a dollar shortage continues. The black market USD to Zimbabwe dollar was trading at 10,900 on Tuesday while the official rate stood at 6,900.
There are other reasons why the ZIM dollar is collapsing. For example, the tobacco season has just ended, leading to more dollar demand as farmers seek to cushion themselves from the ZIM dollar volatility.
Other African currencies have started the year on the back foot as investors anticipate more dollar shortage. The Kenyan shilling has retreated to 158 against the US dollar while the Angolan kwanza has moved to 840, from 400 in 2020. Also, the Rwandan franc has surged to 1,250 against the US dollar.