Nigeria had the largest economy in Africa in 2022, but in 2023, Egypt took over as the largest economy. However, both countries experienced a decline in their economic fortunes due to high inflation rates caused by currency devaluations. These currency devaluations worsened their internal economic crises. Nigeria's GDP for this year is projected to be $253 billion based on current prices according to the International Monetary Fund's (IMF) World Economic Outlook. This figure is lower than the GDPs of Algeria, Egypt, and South Africa which are projected to be higher, at $267 billion, $348 billion, and $373 billion, respectively.
The Economic Outlook predicts that Egypt will fall to second place behind South Africa this year, while Nigeria is expected to drop to fourth. Although Nigeria is expected to remain in fourth place for some time, Egypt is anticipated to regain the top spot in 2027.
Since entering office as president of Nigeria at the end of May 2023, Bola Tinubu has announced significant policy reforms, such as allowing the currency to float more freely, scrapping costly energy and gasoline subsidies, and taking steps to address dollar shortages. After two currency devaluations, the naira is still 50% weaker against the US dollar than it was when he took office, even with a recent comeback.
Egypt as one of the most indebted emerging economies in the world is ranked second in terms of IMF borrowing, following Argentina. To attract investment, Egypt allowed its currency to float, which led to a 40% decline in the value of the pound last month. As a result, the government was able to receive a $8 billion loan from the global lender, which is almost three times the size of the original loan program agreed upon in 2022.
The IMF had been advocating for a flexible currency policy for many months. The World Bank and the European Union contributed an additional $14 billion in financial help as a result of this.
The value of South Africa's rand has traditionally been determined by the financial markets, in contrast to Nigeria's naira and Egypt's pound. However, the rand has experienced a 4% decline against the US dollar so far this year. The country's economy is expected to see positive effects from improvements in its energy supply and efforts to address logistical challenges.
Algeria, which is a member of OPEC+, has been profiting from the high prices of oil and gas due to 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.
