Currency movements across African economies are diverging sharply in mid-2025, with the Ghanaian cedi emerging among the region’s few bright spots while more than a dozen other currencies have come under pressure, reflecting broader macroeconomic imbalances and external shocks, according to Afreximbank’s June 2025 macroeconomic report.
The data shows that while most African currencies have “developed steadily,” nearly half experienced depreciation in May. Ghana, South Africa, Namibia, and Eswatini saw notable currency appreciation, buoyed by tight monetary policy, improving trade balances, and rising investor confidence. In contrast, countries like Nigeria, Ethiopia, and Chad recorded some of the steepest declines.
The report noted Ghana’s CPI trend, slowing to 18.4% year-on-year in May, the lowest since February 2022, due to tight monetary and fiscal policy, a stronger cedi, and improved confidence. Inflation in Ghana currently stands at 13.7%.
Ghana Leads Currency Strengtheners
The Ghanaian cedi appreciated by 21.5% month-on-month in May, a significant reversal after years of pressure. This gain is partly credited to the Bank of Ghana’s restrictive interest rate policy, which helped anchor inflation and attract capital inflows, along with a fiscal rebound that led to an upgrade in the country’s sovereign credit rating to CCC+ by S&P.
The cedi’s strength has also supported easing inflation and improved purchasing power, even as policymakers tread carefully on interest rate adjustments to avoid choking a fragile recovery.
South Africa and Namibia, whose currencies are linked, also saw their currencies rise by over 7%, helped by relative macroeconomic stability and commodity-related export performance.
Broad Depreciation Elsewhere
Conversely, Nigeria’s naira continued its slide, depreciating by 2.1% in May and 11.5% over the past year. Despite recent reform efforts and declining inflation, down to 22.97% in May, investor concerns over forex shortages, external debt service, and policy uncertainty have weighed on the currency.
Ethiopia’s birr posted one of the steepest year-on-year depreciations, falling more than 55%. Though the central bank has begun liberalizing the foreign exchange regime under an IMF-supported program, the transition has exposed the currency to renewed volatility.
Chad, Malawi, Zimbabwe, and South Sudan also reported sharp currency losses, many driven by structural vulnerabilities, weak exports, and limited access to international capital markets.
Policy Responses Vary
With inflation easing across much of the continent, some central banks, particularly in the West African Monetary Union (WAEMU) and Kenya, have started cutting interest rates. However, countries experiencing currency weakness and lingering inflation, such as Nigeria and Ethiopia, remain locked in tight policy stances.
“Most African currencies have been steadily developing,” Afreximbank noted, but stressed that the balance of exchange rate movements reflects differing fundamentals and policy capacities across the continent.
Implications for Trade and Inflation
Currency depreciation is particularly troubling for import-reliant economies, where weakened currencies feed directly into higher consumer prices, especially for fuel, food, and capital goods. Rising shipping and insurance costs, tied to geopolitical tensions in the Middle East, are compounding pressures for countries already managing exchange rate volatility.
Afreximbank warns that continued divergence in currency performance could widen inflation gaps across the region and complicate cross-border trade integration under the African Continental Free Trade Area (AfCFTA).
While currency volatility is not new to African economies, the stark divergence in recent months underscores the growing importance of credible monetary policy, fiscal discipline, and structural reform. Ghana’s currency rally offers one example of what can go right, but many economies remain vulnerable to global shocks, weak export performance, and shifting investor sentiment.
