Economic Outlook in Africa : challenges in Nigeria, rise in Algeria
Nigeria's economy is poised to be relegated to second place behind South Africa due to naira devaluation, while Algeria is on the rise fueled by its oil and gas sales to Europe. These are the latest projections from the IMF confirming a growth rebound on the continent but also the lingering financing shortage.
By the editorial staff
Nigeria’s economy, classified as Africa’s largest since 2018, is on track to lose its position to South Africa, according to forecasts from the International Monetary Fund (IMF). The latest report on the Institution’s economic outlook predicts that Nigeria’s Gross Domestic Product (GDP), currently at $253 billion, will be surpassed by those of Algeria at $267 billion, Egypt at $348 billion, and South Africa at $373 billion, based on current prices.
South Africa will remain the continent’s largest economy until Egypt regains the top spot in 2027
« South Africa will remain the continent’s largest economy until Egypt regains the top spot in 2027, » according to the IMF projections, while Nigeria will remain in fourth place for many years.
Despite significant reforms led by Nigerian President Bola Tinubu, high inflation and currency depreciation have weakened Nigeria’s economy. Analysts estimate that despite the naira’s rebound, it is still 50% weaker against the US dollar.
On the other hand, Egypt is one of the world’s most indebted countries and the largest debtor to the IMF after Argentina. It also experiences currency fluctuations, leading to a 40% drop in the Egyptian pound against the dollar.
In contrast to the Nigerian naira and the Egyptian pound, the value of the South African rand is determined in financial markets. It lost about 4% of its value against the dollar in 2024. However, improvements in emergency supply and plans to address logistical issues are expected to benefit the South African economy.
Following four tumultuous years, prospects for sub-Saharan Africa are gradually improving
« Following four tumultuous years, prospects for sub-Saharan Africa are gradually improving, » observes the IMF. Economic growth is projected to increase from 3.4% in 2023 to 3.8% in 2024, with nearly two-thirds of countries expecting higher growth. Economic recovery is expected to continue beyond this year, with growth projections reaching 4.0% in 2025. Additionally, inflation has nearly halved, public debt ratios have stabilized overall, and several countries have issued eurobonds this year, ending a two-year hiatus.
« 3 policy priorities: improve public finances without compromising development; a monetary policy focused on ensuring price stability; and implementing structural reforms to diversify sources of financing and economies. »
However, not all is favorable. Financing shortages persist as governments in the region continue to face funding shortfalls, high borrowing costs, and imminent debt repayments, notes the IMF. « Risks to the outlook remain tilted to the downside. The region continues to be more vulnerable to global external shocks, as well as the threat of increasing political instability and frequent climate events. »
In response, the Institution advocates for « 3 policy priorities » that can help countries adapt to these challenges: « improve public finances without compromising development; a monetary policy focused on ensuring price stability; and implementing structural reforms to diversify sources of financing and economies. » And to conclude: « Faced with these challenges, sub-Saharan African countries will need additional support from the international community to develop a more inclusive, sustainable, and prosperous future. »
For more information : Read the report
