Despite sundry reform initiatives of the President Bola Tinubu-led administration to revitalize the nation’s economy, latest forecast from the International Monetary Fund (IMF) indicated that Nigeria’s economy continued its unimpressive performance, dropping into the fourth position in Africa economies’ ranking chart.
This is coming barely two years after it was ranked as Africa’s largest economy in 2022.
Also, Egypt, which ranked top in the economic performance chart in 2023, is projected to fall to second position behind South Africa after a series of currency devaluations.
The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging behind energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.
The data indicated that South Africa, Africa’s most industrialized nation will remain the continent’s largest economy between now until Egypt reclaims the mantle in 2027, while Nigeria is expected to remain in fourth place for years to come.
The latest unimpressive rankings of Nigeria and Egypt are not unconnected with the high inflationary trends in the two economies as well as recent depreciation recorded by their currencies in the foreign exchange markets.
President Tinubu has since his assumption of office in May last year introduced monetary and fiscal policy reforms, including the floating of the Naira in the FX markets, scrapping of the fuel subsidy, amongst other measures.
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.
On its own, Egypt, which is 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. The loan 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. South Africa’s 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.
