The economy of the giant of Africa, Nigeria, which was Africa’s largest in 2022, is set to slip to fourth place this year, according to the International Monetary Fund (IMF).”
The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product (GDP) at $253 billion based on current prices for this year, placing it behind Algeria ($267 billion), Egypt ($348 billion), and South Africa ($373 billion).
The shift comes as both Nigeria and Egypt grapple with high inflation and significant currency devaluations. Egypt, which held the top position in 2023, is projected to fall to second place behind South Africa.
Since assuming office in May 2023, Chief Bola Ahmed Tinubu has implemented significant policy reforms, including allowing the currency to float more freely, ending energy and gasoline subsidies, and addressing dollar shortages.
Despite a recent recovery, the naira remains 50% weaker against the dollar compared to its value before Tinubu’s tenure, following two devaluations.
Egypt, facing similar economic challenges, has allowed its currency to float, resulting in a nearly 40% drop in the pound’s value against the dollar last month. This move aimed to attract investment and followed the IMF’s calls for a flexible currency regime. The IMF increased its loan program to Egypt to $8 billion, prompting an additional $14 billion in financial support from the European Union and the World Bank.
South Africa’s rand, whose value is determined by financial markets, has depreciated by about 4% against the dollar this year. However, South Africa’s economy is expected to benefit from improvements in its energy supply and efforts to address logistic bottlenecks.
Algeria, an OPEC+ member, has capitalized on high oil and gas prices resulting from geopolitical tensions, including Russia’s invasion of Ukraine and conflicts in the Middle East. Algeria has been aiding Europe in mitigating gas shortages caused by reduced Russian supplies.
The IMF projects that South Africa will remain Africa’s largest economy until Egypt reclaims the position in 2027, with Nigeria expected to stay in fourth place for the foreseeable future.
Bloomberg
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