Zimbabwe’s new currency, Naira seen slope downward after central banks’ intervention

Zimbabwe’s gold-backed currency, and the naira have further weakened due to increased dollar demand, after interventions by both central banks. Zimbabwe’s gold was devalued by 43 percent by the Reserve Bank of Zimbabwe (RBZ) on Friday, after they hiked the benchmark interest rate to 35 percent from 20 percent. The ZiG, short for Zimbabwe Gold, was quoted at 24.88 per dollar today, compared with 24.39 on Friday, according to the RBZ. The government’s decision to devalue the currency against the dollar further cast doubts about its value in the minds of the citizens, leading to its wide rejection.

In Nigeria, the Central Bank in a bid to stabilise the naira and rein in inflation hiked the benchmark interest rate by 50 basis points to 27.25 percent. However, the naira fluctuated, closing at ‪1541.94‬ per dollar today, from 1540 per dollar quoted on Friday. The also CBN sold dollars to authorized dealers in an attempt to stem the sudden depreciation.

The CBN sold $60 million to commercial banks. In addition, the CBN provided dollars to Bureau De Change (BDC) operators at a rate of N1,590 per dollar to improve liquidity in the FX market. Muda Yusuf, director/CEO, Centre for the Promotion of Private Enterprise (CPPE), earlier told BusinessDay, “The rate hike cannot address these issues. The issues are much deeper. The rate hike is putting unnecessary pressure on those who are borrowing money.”

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Zimbabwe’s headline inflation quickened to 1.4 percent in August and the currency devaluation is expected to worsen inflation. Rosemary Mpofu, CEO, Consumer Council of Zimbabwe said that business owners in the informal sectors are refusing the ZiG.

“When boarding public transport on our everyday normal routes, we see that on the same route that we used to travel using $0,50, we are being charged $1 because of change challenges,” she said in an earlier interview.

“We did a survey and also consulted with ZERA [Zimbabwe Energy Regulatory Authority] and we discovered that so far, no fuel station is accepting ZiG,” she stated.

Amalgamated Rural Teachers Union of Zimbabwe (ARTUZ) have also called on the government to adjust the teachers’ salary after the devaluation.

In a post on x yesterday, the union demanded that teachers’ salaries be paid in US dollars. “The Zig component of Teachers’ salaries was calculated as follows: $140 × rate of 13.50= 1890ZWG. The minimum we can accept is the adjustment using the new rate, $140 x new rate of 25 = 3500ZWG backdated to June when the Zig lost value. Going forward the Union demands that the USD 140 be paid in hard currency,” the post stated.

After multiple currencies, the ZiG was Zimbabwe’s attempt to resolve its persistent inflation and currency crisis.

In April 2024, Zimbabwe rolled out a new gold-backed currency called the ZiG, or Zimbabwe Gold to mitigate the currency instability and hyperinflation that has plagued the country for decades. The ZiG started trading at 13.90 per dollar in April when it was introduced. The Central Bank of Nigeria (CBN) has been fighting a losing battle trying to stabilise the naira.