Nigeria’s economy slips to fourth place

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 last year, is projected to fall to second behind South Africa after a series of currency devaluations, show International Monetary Fund (IMF) forecasts.

The IMF’s world economic outlook estimates Nigeria’s gross domestic product at $253 billion (about R4.9 trillion), based on current prices this year, lagging energy-rich Algeria at $267 billion (R5.1 trillion), Egypt at $348 billion and SA 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, shows the data released this week.

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 last year, 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 programme first approved in 2022 to $8 billion.

Unlike Nigeria’s naira and Egypt’s pound, the value of SA’s rand has long been set in the financial markets and it has lost about 4% of its value against the dollar this year.