Naira depreciation will make Nigeria’s economy the fourth largest in Africa by 2024, according to the IMF

Apr 25, 2024 | International | 0 comments

The International Monetary Fund (IMF) has forecasted that Nigeria will slip to the fourth-largest economy in Africa by 2024, behind South Africa, Egypt, and Algeria, primarily due to currency devaluation.

According to the IMF’s April 2024 forecasts, Nigeria, which has held the title of Africa’s largest economy since the GDP rebasing in 2013, is projected to have a total GDP of $253 billion in 2024, mainly due to the devaluation of the Naira.

The IMF predicts that South Africa will lead as Africa’s largest economy with a GDP of $373 billion, followed by Egypt with $348 billion and Algeria with $267 billion.

In 2023, projections already hinted at South Africa overtaking Nigeria as Africa’s largest economy.

Based on IMF estimates, Nigeria’s GDP in US Dollars declined from $477 billion in 2022 to $375 billion in 2023, and it is estimated to drop further to $253 billion in 2024. However, in Naira terms, the GDP improved from N202.4 trillion in 2022 to N234.4 trillion in 2023 and is expected to rise to N296.4 trillion in 2024.

IMF data indicates that Nigeria was Africa’s largest economy in 2022 but dropped to third place in 2023, behind Egypt and South Africa, due to Naira devaluation.

Since President Bola Tinubu took office in 2023, the official exchange rate of the Naira has plummeted by over 55 per cent, significantly affecting the country’s GDP computation.

Meanwhile, economic reforms in Egypt since March 2024 have led to a nearly 40% decline in the Egyptian Pound within just over a month. In South Africa, the Rand has only devalued by a modest 4% in 2024.

The IMF estimates Nigeria’s GDP will grow by 3.34% in 2024, up from 2.86% in 2023, while South Africa’s GDP is expected to grow by 0.9% in 2024, compared to 0.6% in 2023. Egypt’s GDP growth is projected to slow down to 3.0% in 2024 from 3.76% in 2023.

This underscores the importance of adjusting for differences in Purchasing Power Parity (PPP) rather than solely relying on nominal GDP figures, as currency valuation can distort rankings. PPP offers a more accurate representation of economic size and performance, especially when impacted by currency fluctuations, providing a clearer picture of real economic growth in goods and services.

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