Why currencies across Africa are struggling against the dollar
African countries are battling a persistent wave of currency depreciation, with several of the continent's currencies among the world's worst performers.
From Nigeria to Malawi, the decline of national currencies has sent food prices soaring, eroded savings, and heightened public frustration.
Currency losses push up the price of imported essentials from food and fuel to fertiliser, denting living standards.
Nigeria's naira has fallen by over 30% in 2025, following a Central Bank decision to float the currency and remove fuel subsidies, moves that spiked inflation and the cost of living. Today, it trades at approximately ₦1,500 per dollar.
The Malawian kwacha has collapsed by nearly 40% over the past year, reaching around MWK 1,700/USD, deepening economic hardship in an agriculture-dependent, import-reliant economy. Malawians now face fertiliser costs that are five to seven times higher than just two years ago, a disaster for farming communities already stretched by economic and climatic shocks. The African Exponent
Other currencies like the Rwandan franc and Congolese franc have depreciated by approximately 19% and 17%, respectively, driven by struggles in export capacity, political instability, and import dependence.
Meanwhile, the South African rand remains volatile, recently flirting with multi-month lows around ZAR 19.40/USD. Although linked to bleeding investor sentiment, the rand has not collapsed entirely, thanks to gold prices and occasional policy support.
What’s causing the crisis?
Many African nations owe large sums in USD. As local currencies lose value, servicing that debt becomes exponentially more expensive, leaving little flexibility for governments already contending with rising inflation and budget shortfalls.
Several economies export largely raw materials but then import finished goods, often priced in dollars at significantly higher costs. That imbalance puts extreme pressure on currencies, especially when global demand softens.
In times of global uncertainty, whether due to rising U.S. interest rates, geopolitical shifts, or local political instability, investors withdraw funds. This capital flight quickly drains local currency reserves and triggers sharp depreciation.
Many central banks also do not have enough dollar reserves to cushion their currencies during market stress. Without this buffer, even modest shocks can cascade into deeper crises.
Some central banks have responded with sharp interest rate hikes (e.g., in Nigeria, Angola, Egypt), while others, like Kenya or South Africa, have taken a more cautious approach. The inconsistent policy responses can further unsettle markets
Beyond the economics, the crisis has social ramifications: disillusionment is rising, and protest movements are gaining traction as youth struggle to find employment in a shrinking economy
Can the dollar’s grip be weakened?
Some countries are exploring alternatives to dollar-dominated trade. For example, Kenya has started using a Pan-African Payment and Settlement System (PAPSS) to enable intra-African trade in local currencies, an initiative aimed at reducing dependence on foreign exchange.
The African Development Bank also projects further currency declines in 2025 across 21 nations, while noting that a few like Kenya, Morocco, and the CFA franc zone may see modest appreciation.
While depreciation might eventually benefit exporters, it is causing harm to wages, prices, and household security today. Efforts to de-dollarize trade and finance are promising, but current momentum shows most economies remain tethered to U.S. monetary moves for better or worse.
This story is written and edited by the Global South World team, you can contact us here.
