An international accounting and auditing firm, Deloitte, has indicated that, macroeconomic indicators (inflation, exchange rate, interest rate, and debt to GDP) to remain high throughout the rest of 2024 in Ghana and Nigeria.
The the two giants and the entire West African macroeconomic environment remain challenging due to several factors, prominent ones being high inflation, a high interest rate environment, currency weakness, and elevated debt levels.
The worsening economic conditions erodes the purchasing power of consumers while deteriorating standard of living and also increasing cost of doing business in the sub-region. As remarked by Deloitte, both households and businesses are already implementing belt-tightening measures to survive.
“The resulting effect of these macroeconomic headwinds on productivity and overall aggregate demand is likely to stall the region’s economic growth for the year”, Deloitte said in its West Africa economic outlook, August 2024 report.
“In July, the International Monetary Fund (IMF) revised its 2024 growth forecast for Nigeria to 3.1% from its April forecast of 3.3%. The IMF also reduced sub-Saharan Africa’s growth forecast to 3.7% from 3.8% in April due to the downward revision in Nigeria’s growth outlook. Meanwhile, the IMF projects Ghana’s economy will grow 2.8% in 2024 and 4.4% in 2025.”
The report indicated that around 50 countries across the world are heading to the polls this year—or have already done so—including West African countries.
As Ghanaians gears towards the December polls, the current state of the economy and citizens’ welfare will factor heavily into how voters evaluate campaign promises and determine the next leader of the nation, an economy heavily dependent on cocoa and gold. The election outcome will weigh on policy direction, as well as investor and market sentiment.
“West Africa’s economic output has been limited by the rising cost of goods and services, leading to an increase in interest rates as monetary authorities attempt to rein in inflation. Nigeria and Ghana have also been facing currency volatility, which has had a severe impact on their ability to import raw materials and equipment required to boost output. In the first six months of the year, the Nigerian naira has lost over 40% of its value, and the Ghanaian cedi over 20% of its value against the US dollar,” it said.
In the case of Nigeria, it said the oil-rich country’s economy grew by 2.98% year on year in the first quarter of 2024. Although faster than the corresponding period in 2023, when the economy grew 2.31%, it marked a slowdown from an even faster growth rate of nearly 3.5%, seen in the fourth quarter of 2023.
Major growth drivers in the first quarter of 2024 include the finance and insurance sector, which grew 31.24% year on year, and the water supply, sewage, waste management, and remediation sector, which grew by 6.95%. The oil and gas sector—the country’s economic mainstay—grew by 5.7%, after a year of contraction. The agriculture sector, on the other hand, continued to trudge along with a growth rate of 0.18%.
The sluggish pace of growth is indicative of multiple factors, including reduced spending and investment. Consumer spending has declined significantly due to rising consumer product prices. Investment spending in the country has also dwindled, primarily due to foreign exchange difficulties that have partly contributed to the exit of several multinational corporations.
Ghana, compared to Nigeria, appears to have stronger growth prospects, the report said.
Its economy grew by 4.7% year on year in the first quarter of 2024, driven by rapid 6.8% year-on-year growth in the industrial sector. The agriculture and services sectors grew at a slower pace of 4.1% and 3.3% year on year, respectively. The country is recovering from a debt-induced crisis, following the government’s ongoing restructuring of its US$30 million debt. The implementation of monetary policy measures by the Bank of Ghana has also helped reduce inflation. Ghana has been able to secure approval for two tranches of IMF disbursements so far this year, bringing cumulative disbursements from the IMF to US$1.56 billion since 2023.
