In its recently released Africa Outlook 2024, the Economist Intelligence Unit (EIU) paints a challenging picture for Nigeria’s economic landscape, anticipating a double-digit depreciation of the naira next year. Despite Africa’s projected position as the world’s second-fastest-growing major region in 2024, the EIU notes that Nigeria will remain one of the inflation hotspots.
The report underlines the instability in the exchange rate regime, attributing it to high inflation and the persistent gap between official and parallel markets. The EIU suggests that periodic devaluations are inevitable and expects a less severe adjustment against the US dollar compared to 2023.
The major economies of Egypt, Sudan, Ethiopia, Angola, and Nigeria are all predicted to experience double-digit currency depreciation. In Nigeria specifically, an unsupportive monetary policy is highlighted, indicating that the naira will face sustained pressure. The central bank’s perceived lack of capacity to adequately supply the market or clear a backlog of foreign exchange orders adds to concerns, potentially unsettling foreign investors.
On a broader continental scale, Africa is expected to showcase strong economic growth in 2024, positioning itself as the second-fastest-growing major region globally, closely trailing Asia led by China and India. The EIU projects positive growth stories for almost all African states, with only war-torn Sudan and struggling Equatorial Guinea anticipated to contract economically in 2024.
Despite the overall positive growth outlook, inflation remains a central concern for several large African economies, including Angola, the DRC, Egypt, Ethiopia, Ghana, Nigeria, Sudan, and Zimbabwe. The EIU attributes this to another year of double-digit consumer price inflation, largely driven by elevated oil prices.
The report additionally warns about the financial squeeze faced by African nations in 2024 due to excessive debt and a burdensome debt-repayment load. It emphasizes that elevated external debt, coupled with the aftermath of various external shocks such as the COVID-19 pandemic, Russia’s invasion of Ukraine, and adverse weather conditions linked to global climate change, could further expose Africa’s economic vulnerabilities. The absence of external debt restructuring is seen as a potential source of heightened risks in the coming year.