These African Currencies Are Under Pressure

Several African currencies, including the Ghanaian cedi, Nigerian naira and Ugandan shilling, are facing renewed pressure as stronger demand for the US dollar, widening trade deficits and external financing challenges weigh on foreign exchange markets across the continent. While the currencies have avoided sharp selloffs, analysts warn that persistent global uncertainty could sustain depreciation pressures in the months ahead.

The Nigerian naira remains under strain despite sweeping foreign exchange reforms introduced over the past two years. Although improved dollar liquidity and tighter monetary policy have helped reduce volatility, demand for foreign currency continues to outpace supply, keeping pressure on the local currency. Analysts also point to lower oil receipts and rising import demand as factors limiting the naira’s recovery.

Ghana’s cedi, one of Africa’s strongest-performing currencies earlier this year, has also begun to lose momentum. The slowdown follows months of appreciation driven by stronger gold exports, improved foreign exchange inflows and progress under the country’s International Monetary Fund reform programme. Economists say the recent weakness reflects profit-taking by investors, seasonal demand for dollars and uncertainty surrounding global commodity markets.

Uganda’s shilling has similarly come under pressure as importers increase demand for foreign currency to finance fuel, machinery and manufactured goods. Market participants say seasonal corporate demand and reduced foreign exchange inflows have contributed to the currency’s recent decline, although the central bank continues to monitor conditions closely.

The renewed weakness comes as the US dollar strengthens against most major and emerging market currencies. Expectations that the US Federal Reserve will keep interest rates elevated have encouraged investors to shift funds into dollar-denominated assets, reducing capital flows into frontier and developing markets. That trend has increased pressure on African currencies that rely heavily on foreign portfolio investment and commodity export earnings.

Currency depreciation poses significant risks for African economies because it raises the cost of imports, increases inflationary pressures and makes servicing foreign currency debt more expensive. Countries that depend heavily on imported fuel, food and industrial inputs are particularly vulnerable to sustained exchange rate weakness.

Despite the challenges, analysts do not expect a return to the severe currency volatility experienced in previous years. Several African central banks have maintained relatively tight monetary policies, while stronger export earnings from commodities such as gold and crude oil have helped improve foreign exchange reserves in some countries. Continued policy reforms and stable global financial conditions could also help limit further depreciation.

For now, investors remain focused on global interest rate expectations, commodity prices and capital flows, all of which will shape the outlook for African currencies. Until external conditions improve, the cedi, naira and shilling are likely to remain among the region’s most closely watched currencies as policymakers seek to balance exchange rate stability with economic growth.

Zanele Muholi (South Africa)

Most Famous Photo: Images from their ongoing series “Faces and Phases,” which documents the lives of black
lesbian, gay, bisexual, transgender, and intersex individuals in South Africa.

Short Bio: Born in 1972, Zanele Muholi is a visual activist and photographer who focuses on empowering and reclaiming the visibility of the LGBTQIA+ community in South Africa. Their powerful black-and-white portraits challenge stereotypes and highlight the struggles and triumphs of individuals often marginalized and subjected to violence.

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