South Africa is set to overtake Nigeria and Egypt as the continent’s largest economy, International Monetary Fund (IMF) forecasts show.
The IMF says 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.
The World Economic Outlook of the International Monetary Fund says Nigeria is expected to remain in fourth place in coming years while Egypt could reclaim the top position by 2027. But it expects the South African economy to benefit from improvements to its energy supply and plans to tackle logistical bottlenecks.
It estimates Nigeria’s gross domestic product this year at $253 billion in current prices, Egypt’s at $348 billion and South Africa’s at $373 billion.
Nigeria’s woes
Nigeria is dealing with many economic challenges which have been blamed for its slip in the economic ranking.
A nearly 30-year high inflation rate of 33%, a weakening currency, and the effects of government economic reforms are some of the problems it is contending with.
The government in May last year undertook economic policy reforms which included scrapping subsidy payments for imported petrol and allowing market forces to determine the exchange rate between the naira and the dollar. This resulted in skyrocketing costs of food and transportation as the cost price of petrol at the pump also tripled.
Nigeria faces dollar shortages needed for imports which the country heavily relies on for most of what it consumes.
According to Bloomberg, despite a recent rebound, the Naira is still 50% weaker against the dollar compared to what it was almost a year ago.
The central bank recently introduced some policies to address rising inflation including increasing interest rates to 24.75% and removing subsidies on electricity tariffs.
But analysts argue that it could take a while for this to have an effect on the economy. -Reporting by Ajeck Mangut in Abuja
