October 2023 FX Analysis: Naira, Rand and Shilling decline

Nigeria, South Africa, and Kenya have experienced significant currency depreciations against the greenback. The official rate of the naira, shilling, and rand have lost 66%, 32%, and 27%, respectively, between 2017 and 2023. 
 

The sharp declines are primarily due to global economic shocks within the period, like the COVID-19 pandemic in 2020 and the Russia-Ukraine war in 2022, which triggered higher inflation, interest rates and expensive imports. More so, stiff-necked domestic FX policies (e.g. import restrictions) and lean dollar inflows in key economies like Nigeria and Kenya contributed to the currency depreciation. The chart above shows that the naira has witnessed more downward pressure than the shilling and rand.
 

So far this year, we’ve seen even steeper currency devaluations than last year, especially in Nigeria and Kenya, as global monetary policy tightening took centre stage, strengthening the value of the US dollar against a basket of other currencies. The naira,