African Currencies Depreciation Forecast: AfDB Sees More Pressure Ahead in 2025
It’s not looking great for a large chunk of Africa’s currencies in the coming year. The African Development Bank (AfDB) has projected that 21 African currencies, including major ones such as Nigeria’s naira and Ghana’s cedi, are on track to lose further ground against the U.S. dollar in 2025.
This forecast is part of the bank’s latest African Economic Outlook report, which provides a comprehensive assessment of Africa’s economic performance in a world marked by geopolitical uncertainties and tightening global markets.
The Currencies Most at Risk: Naira, Cedi, Birr, and Beyond
So, who’s on the shaky side of this forecast? The report points to Nigeria, Ghana, Egypt, Ethiopia, Rwanda, Zambia, Libya, and Zimbabwe as the most likely to see their currencies drop by 6% or more.
Nigeria’s naira is already in rough shape. After the massive devaluation in 2023 and a whirlwind of monetary reforms, it's still struggling. Ghana’s cedi hasn’t caught a break either, weighed down by inflation, shrinking export income, and rising debt.
The Ethiopian birr and Rwandan franc have already started slipping, 5.7% and 2.5% down respectively this year alone. That’s a sign that the tide might already be turning continent-wide.
What’s Driving This Wave of Depreciation?
It’s a mix of external punches and internal cracks. Here’s what the AfDB says is stirring the pot:
- Geopolitical unrest, from global trade tensions to instability in the Middle East
- Rising global interest rates, making it pricier for African countries to borrow
- Limited access to U.S. dollar financing, a real problem for countries that import a lot or rely on outside funding
All of this just piles onto existing problems like budget deficits and trade imbalances, sending currencies further into the danger zone.
A Few Bright Spots: Shilling, Dirham, and the CFA Bloc
It’s not all doom and gloom, though. Some currencies might actually hold their ground, or even gain a bit of strength. The Kenyan shilling, Moroccan dirham, and those in the CFA franc zone are forecast to appreciate by over 3% in 2025.
Why the optimism? These countries are seeing more political stability, renewed investor trust, and an uptick in foreign direct investment. For example, Kenya’s successful Eurobond buyback has boosted confidence and eased pressure on its foreign reserves.
The Way Out: Policy Reforms and Economic Diversification
The AfDB isn’t just waving a red flag; it’s also offering some advice. To keep their currencies from spiraling further, African governments need to take action:
- Modernize exchange rate policies to better match real-world market trends
- Diversify exports so they’re not so dependent on commodities like oil or gold
- Boost domestic revenue to fund growth without leaning too hard on foreign loans
As the report bluntly puts it: “Currency depreciation eats away at purchasing power, drives up import costs, and worsens debt burdens.” The clock’s ticking, and decisive reforms can’t wait.
A Glimpse of Hope in a Tough Landscape
Even with currency struggles ahead, there’s still a silver lining: Africa’s overall economic growth is expected to pick up. The continent’s GDP is projected to rise from 3.3% in 2024 to 3.9% in 2025, and could hit 4% by 2026, thanks to tech advances, increased investments, and a bounce-back in commodity demand.
That said, inflation is still a stubborn obstacle. In 15 African countries, it’s raging in the double digits, eating into household budgets and throwing a wrench into central bank plans. Debt service costs are also climbing, draining resources that could’ve gone to schools, roads, or healthcare.
Final Thoughts: Africa’s Currency Future Will Be Shaped by Policy, Not Just Markets
The AfDB’s 2025 outlook is clear: the continent has what it takes to grow, but its currencies are still in the hot seat. For countries like Nigeria, Ghana, and Ethiopia, stabilizing the local currency isn’t just an economic move; it’s a trust signal to the world.
Whether it’s smarter exchange rate systems, better tax collection, or simply breaking out of the “commodity trap,” the year ahead demands serious, thoughtful leadership. Because in the end, it’s not just about reacting to global markets. It’s about reshaping the story from within.
