The Nigerian Naira has been in a five year free fall against the West African CFA, losing its original value by about 108% since 2015.
The CFA is used by eight former French West African colonies including Benin Republic, Burkina Faso, Ivory Coast, Guinea Bissau, Mali, Niger, Senegal and Togo. 1 CFA exchanged for N33,000 as at August 2015 and exchanged at 0.6888 CFA to 1N by August 2020.
According to data obtained by CBN, the CFA has worked aggressively to close the huge exchange rate gap between both currencies in the last five years.
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Although the Naira started on a strong footing against the CFA in the first half of the decade, the French West African currency began to be a competitive currency, causing the Naira to slide by 69% between August 2015 and August 2016.
Also the continued closure of the official borders between Nigeria and her neighboring francophone countries has increased the rate of smuggling exponentially, thereby increasing the value of the CFA which started at 0.5228 to N1 at the beginning of 2020 and closed at 0.6888 last week, a gain of 36%.
A weak exchange rate means neighbouring countries can import from Nigeria at a cheaper rate but it has become more expensive for Nigerians to import from those countries.
Nigeria however does not gain because neighboring countries do more of exporting into Nigeria than taking imports. West Africa accounted for only 11% of Nigeria’s total export value in 2019.
Many West African countries including Togo, and Benin Republic do business more with China, Morocco, and most of Europe than Nigeria.