Olufemi Adeyemi
Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.
The IMF’s World Economic Outlook estimates Nigeria’s gross
domestic product at $253 billion based on current prices this year, lagging
energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at
$373 billion.
Africa’s most industrialised nation will remain the
continent’s largest economy until Egypt reclaims the mantle in 2027, while
Nigeria is expected to remain in fourth place for years to come, the data
released this week shows.
Nigeria and Egypt’s fortunes have dimmed as they deal with
high inflation and a plunge in their currencies.
Bola Tinubu has announced significant policy reforms since
he became Nigeria’s president at the end of May 2023, including allowing the
currency to float more freely, scrapping costly energy and gasoline subsidies
and taking steps to address dollar shortages. Despite a recent rebound, the
naira is still 50% weaker against the greenback than what it was prior to him
taking office after two currency devaluations.
Egypt, one of the emerging world’s most-indebted countries
and the IMF’s second-biggest borrower after Argentina, has also allowed its
currency to float, triggering an almost 40% plunge in the pound’s value against
the dollar last month to attract investment.
The IMF had been calling for a flexible currency regime for
many months and the multilateral lender rewarded Egypt’s government by almost
tripling the size of a loan program first approved in 2022 to $8 billion. This
was a catalyst for a further influx of around $14 billion in financial support
from the European Union and the World Bank.
Unlike Nigeria’s naira and Egypt’s pound, the value of South
Africa’s rand has long been set in the financial markets and it has lost about
4% of its value against the dollar this year. Its economy is expected to
benefit from improvements to its energy supply and plans to tackle logistic
bottlenecks.
Algeria, an OPEC+ member has been benefiting from high oil
and gas prices caused first by Russia’s invasion of Ukraine and now tensions in
the Middle East. It stepped in to ease some of Europe’s gas woes after Russia
curtailed supplies amid its war in Ukraine.
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