Nigeria’s economy, other African countries to grow by 4.1% amid crises, says AfDB

The African Development Bank (AfDB) says Nigeria and other economies of Africa is projected to grow by 4.1 percent in 2023 and 4.3 percent in 2024.

The AfDB President, Dr Akinwumi Adesina, said this while inaugurating the African Economic Outlook (AEO) 2023 at the on-going 2023 AfDB Annual Meetings in Sharm El Sheikh.

According to him, the economies on the continent have shown remarkable resilience in spite of the multiple and dynamic shocks it faced.

“These multiple and dynamic shocks have weighed on Africa’s growth momentum, with growth in real Gross Domestic Product (GDP) estimated at 3.8 percent in 2022.

“This is down from 4.8 percent in 2021. The GDP growth in 2022 is above the global average of 3.4 percent.

“Africa has also shown remarkable resilience, evident in the projected consolidation of economic growth in the medium term.

“The outlook remains positive and stable, with a projected rebound to four percent in 2023 and further consolidation to 4.3 percent in 2024.

The AfDB boss attributed the slowed growth on the continent to the tightening global financial conditions and supply chain disruptions exacerbated by Russia’s invasion of Ukraine, which subdued global growth.

He said growth was also impaired by the residual effects of the COVID-19 pandemic and the growing impact of climate change and extreme weather events.

Adesina said Africa had a great potential to pursue green growth and climate objectives to accelerate economic growth, given its enormous advantages.

He said the continent had some of the world’s fastest-growing economies and its real GDP growth was projected to surpass the global average from 2023 to 2024, even as headwinds persist.

He further said the continent also had an important human capital base, with its population projected to increase to 2.4 billion by 2050.

“As most of the current population is young, compared with other regions’ aging populations, Africa is the current and future frontier market in green growth opportunities.

“Africa hosts 25 percent of the world’s natural biodiversity and 30 percent of the world’s mineral resources, most of which will be essential for a green transition.

“Africa has a large renewable energy potential including wind, solar, hydropower and geothermal and the world’s highest solar energy potential.

“Countries in the continent also have the greatest potential for investments in green infrastructure and technology.

The AfDB president said this was due to their low levels of development, low legacy high-emissions infrastructure, and low frequency of infrastructure and project finance default rates, estimated at 5.5 percent.

Also, the AfDB Vice President for Economic Governance and Knowledge, Prof Kelvin Urama, said the deceleration was broad-based, with 31 of the 54 African countries posting weaker growth rates in 2022 relative to 2021.

Urama said the continent, however, performed better than most world regions in 2022.

He said the continent’s resilience projected to put five of the six pre-pandemic top-performing economies, Benin, Côte d’Ivoire, Ethiopia, Rwanda, and Tanzania, back in the league of the world’s 10 fastest-growing economies in 2023–24.

“Growth is projected to rebound to four percent in 2023, and consolidate at 4.3 percent in 2024, underpinning Africa’s continued resilience to shocks.

“In spite of this, climate change, elevated global inflation, and persistent fragilities in supply chains will remain on the watchlist as potential factors for possible slowdowns of growth in the continent,’’ he said.

Urama said while most African currencies weakened, others appreciated or remained stable.

According to him, countries with appreciating currencies include Angola (27.1 percent), Seychelles (15.6 percent), and Zambia (15.3 percent).

Urama said depreciation rates could ease in 2023 and 2024, but continued strengthening of the U.S. dollar would keep African currencies under pressure.

He said currency weaknesses in some of Africa’s more globally integrated economies (Kenya, Nigeria, and South Africa) are expected to persist in 2023.

“This is largely due to potential capital outflows as investors search for safe assets in advanced economies.’’

“Public debt is projected to remain high, with lingering vulnerabilities.

“Although the median public debt in Africa is estimated to have declined to 65 percent of GDP in 2022 from 68 percent in 2021.

“Thanks to debt relief initiatives in some countries, it will remain above the pre-pandemic level of 61 percent of GDP.

The economist said this debt GDP ratio was expected to increase to 66 percent in 2023 and then to stabilise at around 65 per cent in 2024.

He said this was due to growing financing needs associated with rising food and energy import bills, high debt service costs due to interest rate hikes, exchange rate depreciations, and rollover risks.

  “In addition, many countries’ difficulties in accessing international capital markets, combined with limited revenue mobilisation, have led them to issue local currency debt.

“The debt increased substantially from 35 percent of GDP on average in 2019 to 42 percent in 2021

“Domestic debt restructuring, therefore, should be part of the negotiations for the resolution of public debt crises in countries facing heightened risks,” the vice-president said.

BRANDPOWER reports that the bank’s annual meetings which began on May 22 will end on Friday.

BRANDPOWER reports that the theme of the 2023 Annual Meetings is ”Mobilizing Private Sector Financing for Climate and Green Growth in Africa.

It provides a framework for Bank Group Governors to share their experiences with galvanizing private financing domestically and internationally and harnessing natural capital to bridge the climate financing gap and promote the transition to green growth in Africa.

The annual meetings comprise statutory meetings of its Governors (finance ministers or central bank governors representing the 81 member countries – and knowledge events.

Attendees also include representatives of bilateral and multilateral development agencies, leading academics and non-governmental organizations, civil society, and the private sector.

The meetings are the Bank Group’s most important event annually, attracting around 3,000 participants.