Since the early 1990s, Africa has emerged as an increasingly important player in the world economy. This is largely due to its natural resources and its booming population; which will soon surpass that of China’s. The rise of African nations has led many economists to believe that their currencies are on track for a meteoric rise as well. As a result of such advancements, currencies in African countries have been on a steady rise. The benchmark for the rise in strength is the United States Dollar which is the most powerful currency. This article presents the top 15 strongest currencies in Africa.
The top 3 strongest currencies in Africa, based on comparison to the American dollar, interest rates, and inflation are:
- Libyan Dinar (1 USD=1.41 LD)
- Tunisian Dinar (1 USD=2.87 DT)
- Ghanaian Cedi (1 USD=GH₵ 6.04)
The U.S. Dollar is used as a benchmark in this ranking because of its value and use across the world.
The table below presents the top 15 strongest currencies in Africa:
|Position||Country||Currency||Dollar Comparison||Reasons for Better Ranking|
|1||Libya||Libyan Dinar||1 USD=1.41 LD||Strict monetary policies in Libya|
|2||Tunisia||Tunisian Dinar||1 USD=2.87 DT||-Formidable import and export policies.|
-Strict monetary regulations
|3||Ghana||Ghanaian Cedi||1 USD= GH₵ 5.49||Job growth and government spending programs|
|4||Morocco||Moroccan Dirham||1 USD=MAD 9.20||Being a de-facto exchange medium in Western Sahara|
|5||Botswana||Botswana Pula||1 USD=P 11.6||Exemplary policies and economy|
|6||Seychelles||Seychellois Rupee||1 USD=SR 13.58||Strict monetary policies|
|7||South Africa||South African Rand||1 USD=R 14.85||The value of Gold|
|8||Eritrea||Eritrean Nakfa||1 USD=Nfk 15.00||The government does not float the currency|
|9||Egypt||Egyptian Pound||1 USD=E£ 15.80||Unofficial use of the Egyptian Pound in Sudan and Gaza|
|10||Zambia||Zambian Kwacha||1 USD=ZK 16.55||The value of copper|
|11||Sao Tome||Sao Tomean Dobra||1 USD=Db 20.91||The influx of economic activities in Sao Tome|
|12||Mauritania||Mauritanian Ouguiya||1 USD=UM 35.95||Stability in the country’s economy|
|13||Mauritius||Mauritian Rupee||1 USD=Rs 42.70||Government stability|
|14||Ethiopia||Ethiopian Birr||1 USD=Br 46.05||-Conservative monetary policies|
-Positive economic growth
|15||The Gambia||Gambian Dalasi||1 USD=D 51.55||Stable economy|
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Factors that Affect Currency Strength
The strength of these currencies is determined by several factors in their respective countries. These are the factors that impact how a currency performs in the market. Here are the four crucial factors affecting the strength of currencies in the world:
A country’s interest rates affect the strength or weakness of its currency. A higher interest rate means that the country is financially stable and strong, which results in a stronger currency. Countries with high interest rates are usually able to generate more revenue for their government through taxation as well as ensure the safety of investments by protecting them from inflation.
Investors are interested in high-interest-rates currencies because they can receive a greater return on their investment and also benefit from the stability of such economies. You should understand that a trader is compensated by the differential in the interest rate of a given currency.
Another factor that affects currency strength is inflation rates. Inflation rate refers to how quickly or slowly prices for goods and services increase in an economy, expressed as a percentage rate over time. It results when too much money is chasing after not enough goods or services, which causes the value of money to go down. Inflation also occurs when people have more money and they want to buy more things but there are no additional products for them to purchase with their extra cash.
In terms of inflation rates, high product prices are preferred for a country to have high inflation. Although this is not good for consumers, It’s a good move to ensure economic growth. A growing economy, in turn, increases the strength of the country’s currency.
This is another factor that affects the strength of a country’s currency. Economic growth refers to the expansion of a business or economy, which means that it is increasing its revenue and net worth. Economic growth often leads to increased levels of employment and hence more people with higher incomes.
The high level of economic activity strengthens the currency by attracting foreign investment into that country. This can result in an inflow of capital from abroad, which can have a significant impact on the strength of the country’s currency.
Current Account Balance
This denotes the total amount of goods, income, services, and current transfers of a country in comparison to its trading partners. This is the difference between all the money coming into and out of a country. A current account surplus occurs when there are more incoming monies than outgoing. Therefore, this increases foreign reserves and strengthens the currency.
A strong currency can result in an increase in exports for that country since prices become lower on world markets. Consequently, it becomes cheaper to buy imports from other countries. In turn, the country’s manufacturing industry can experience rapid growth which in turn will contribute to the expansion of its economy thus, strengthening the currency further.
Benefits of a Strong Currency on Economy
A strong currency has the following benefits on the country’s economy:
- More Foreign Investment
- Income Inequality Decreases
- More Jobs and Economic Growth
- Increase in Exports