The Economist Intelligence Unit (EIU) has said the naira is expected to depreciate further by double digits next year, even as the country will remain one of the inflation hotspots in Africa.
The EIU, in its Africa outlook 2024 released on Thursday, said high inflation and a continued spread between the official and parallel markets will leave the exchange rate regime unstable and result in periodic devaluations.
It forecasts currency depreciation against the US dollar across much of Africa in 2024, although adjustments are expected to be less severe than those recorded in 2023.
“Double-digit currency depreciation is anticipated in the major economies of Egypt, Sudan, Ethiopia, Angola and Nigeria,” it said.
“In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved.”
The EIU predicted that Africa will be the world’s second-fastest-growing major region in 2024, just behind Asia, which will be propelled by China and India.
It said almost all African states will post a positive growth story, with war-torn Sudan and struggling Equatorial Guinea the only economies that look set to contract in 2024.
“Indeed, 12 of the world’s 20 fastest-growing economies in 2024 will be in Africa, and African real GDP is forecast to grow by 3.2 percent in 2024, up from 2.6 percent in 2023,” it said.
The firm said inflation will run strong into 2024 and remain a central story for several large economies, including Angola, the DRC, Egypt, Ethiopia, Ghana, Nigeria, Sudan and Zimbabwe.
“These countries will continue to suffer the economic instability generated by another year of double-digit consumer price inflation, largely driven by elevated oil prices,” it added.
The EIU said African nations will feel the financial squeeze created by excessive debt and a heavy debt-repayment burden in 2024, which will weigh on economic growth and stability in some countries.
It said the financial pressure created by elevated external debt has been compounded by the fallout from multiple external shocks in recent years, including the COVID-19 pandemic, Russia’s invasion of Ukraine and adverse weather conditions linked to global climate change.
“Softer economic growth, higher inflation, weaker currencies and more costly international capital have exposed Africa’s debt frailties in 2023, and risks are likely to mount in 2024 in the absence of external debt restructuring,” it added.