Deloitte West Africa has raised concerns over the surge in inflationary trend in the last quarter of 2024 in Ghana and Nigeria.
This, the professional accounting firm believes could affect the rate of economic growth in both West African economic giant nations as a further surge is expected in December due to the Christmas and new year festive spending.
“The resultant of rising inflation is that, businesses face higher costs while consumers have to cut spending, worsening the ongoing cost of living crisis”, Deloitte, the globally acclaimed professional services firm, shared in its November 2024 Inflation Update.
Already, inflation in Ghana surged for the third-consecutive month to 23%, driven by rising food prices and election spending.
Headline inflation in Nigeria also rose to 34.60%, reflecting a further increase in the cost of goods and services.
Also, the Economist Intelligence Unit has projected an average inflation rate of 22.4% for Ghana and 33.2% for Nigeria in 2024.
This is expected to decline to 15.2% and 27.7% in 2025 for Ghana and Nigeria respectively, supported by improved foreign exchange stability, trade policy and base effects.
Ghana’s November 2024 inflation was driven by five divisions. They were led by Alcoholic Beverages, Tobacco and Narcotics (30.0%); Housing, Water, Gas and Electricity (29.20%) and Health (22.20%).
Deloitte West Africa has showing about the resilience of the banking system in Ghana despite challenges posed by both exogenous and endogenous macroeconomic factors.
The professional services firm expressed this view in its economic brief centred on the Monetary Policy Rate (MPR) in Ghana and Nigeria, at a time when the Bank of Ghana (BoG) said that Commercial banks had accumulated enough capital buffers to withstand the effects of the external debt restructuring.
The latest macro-prudential risk assessment showed that the impact from the Eurobond restructuring would be minimal, given the preemptive provisioning made by banks to account for potential impairments.
“Banks are therefore expected to continue to remain stable and support economic growth going forward,” it said after announcing a decision by the Monetary Policy Committee (MPC) to keep the Policy Rate at 27%.
Regarding the decision to maintain the policy rate, Deloitte said the the 27 % rate will anchor inflation expectations despite short-term pressures.
It is also believed that the maintenance of the policy rate would support the Cedi recovery and ensure external sector stability. It also said the implication of the unchanged policy rate would also boost business and consumer confidence.
The MPC cited a slightly elevated inflation despite a rebound in the stability of the Ghana cedi and a stable domestic economy as the rationale behind the unchanged policy rate of 27.0%.
Deloitte is optimistic the policy rate will support economic growth and prevent inflation from rising.
On the outlook, it said the Ghanaian economy will pick up, driven by rising business confidence and economic activities.
It furthered that the strengthening of the local currency will help stabilise prices further.
Higher Fuel Prices Impacting Cost of Production in Nigeria
In Nigeria, the MPC raised the MPR to 27.50% for the 6th time since January 2024, amidst rising inflation.
The concerns were higher fuel prices impacting the cost of production and distribution costs, persistent exchange rate pressure, reflecting high forex demand and elevated core inflation.
Deloitte warned that there will be an implication of further squeeze in disposable income, reduced money supply but tighter credit access and increased cost of borrowing and loan defaults.
International accounting firm, Deloitte, is confident that the current appreciation of the local currency, Cedi, is due to Bank of Ghana Monetary Policy Committee’s to stay the policy rate.
The firm believes that, the unchanged policy rate will hold the rebound for a while and in the long run push inflation downwards after stabilizing prices on the market.
The MPC cited a slightly elevated inflation despite a rebound in the stability of the Ghana cedi and a stable domestic economy as the rationale behind the unchanged policy rate of 27.0%. Deloitte is optimistic the policy rate will support economic growth and prevent inflation from rising.
“The implication of the unchanged policy rate would also boost business and consumer confidence”, Deloitte indicated in its economic brief centered on the Monetary Policy Rate (MPR) in Ghana and Nigeria, released last week.
As of Thursday, December 5, the Cedi was buying at 14. 91 to a Dollar and selling at 14.93, per the Bank of Ghana rate as against the rate a day before on Wednesday, December 4, when it was buying at 15.11 to a dollar and selling at 15.12.
With the Pound, it buys at 18.95 and sells at 18.97. With the Euro, it buys 15.69 and sells at 15.71.
These rates represent some marginal gains made by the local currency against the major trading ones.
Meanwhile, analysts have wondered whether or not the Cedi’s resurgence will be sustainable beyond the general elections.
The Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, noted that the recent cedi appreciation is due to deliberate intervention by the Bank of Ghana (BoG) ahead of the election.
“It’s got nothing to do with improved economic fundamentals,” he said.
He expresses the view that “The real test will come after the election.”
A month to the election, Dr Kwakye notes that it has sharply appreciated to below 15 due to BoG intervention.
“But why now? And what is going to happen after the election? Or is it a matter of seek ‘ye’ first election victory and all other things will be yours?”
In response to the doubts raised by Dr Kwakye and other analysts, the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has said, the cedi’s rebound observed recently should continue with the dissipation of election-related uncertainties and the improved foreign exchange buffers accumulated by the central bank.
“A combination of economic uncertainty brought about by the upcoming elections and the high demand for foreign exchange has led to an exchange rate path that is slightly deviated from the fundamentals”, the Committee said last week. “With strong macroeconomic policy implementation and improved foreign exchange availability, the economy should observe a realignment of the trajectory of the exchange rate with the fundamentals.”
The MP further explained that, while global economic conditions remain favourable, the strength of the US economy coupled with a strong United States dollar and the possibility of a resurgence in global energy and food prices arising from trade protectionism, geopolitical conflicts, and extreme weather conditions will have to be monitored closely for policy responses to ensure stability in the economy.
It noted that domestic macroeconomic conditions remain stable and the International Monetary Fund External Credit Facility (IMF-ECF) Programme implementation remains on track.
Data observed through October 2024 indicated broad stability in the macroeconomic indicators. Growth outturn so far has been strong, and leading indicators of economic activity is projecting stronger growth in the second half of the year, business and consumer confidence is slowly turning around, core inflation remains broadly stable, the financial sector inflation expectati ons remain broadly anchored, reserve build-up has been sufficient to provide confidence, and the currency is recording some appreciation, it said.
It added that the third review assessment of the IMF on the economy and on programme implementation also reflected a positive assessment and led to a Staff level Agreement.
“Indications are that the IMF Board will meet in December to assess programme implementation thus far and assess forward-looking prospects of the economy. Sussessful completion of the assessment will likely trigger the release of additional US$360 million in December 2024. This should provide more impetus to stability,” the committee said.
“Commercial banks have accumulated enough capital buffers to withstand the effects of the external debt restructuring. The latest macro-prudential risk assessment showed that the impact from the Eurobond restructuring would be minimal, given the preemptive provisioning made by banks to account for potential impairments. Banks are therefore expected to continue to remain stable and support economic growth going forward.
“Inflation projections show a slightly elevated profile driven by high and unstable food prices, pass-through of previous exchange rate pressures, fuel prices and utility tariff adjustments. The price increases in food items have been steep in the course and together with a fast-paced depreciating currency earlier on in the year have altered the inflation trajectory and stalled the disinflation process. At the time of the last MPC meeting, average inflation forecast a year ahead which stood at 19.0 percent has increased slightly to 20.1 percent at this forecast round. The horizon for inflation to get back within the target band of 6 – 10 percent has slightly shifted forward to Q42025 from the original forecast period of Q32025.
“In the near-term, strengthening of the currency will augur well for future price developments. Under the circumstances, the Monetary Policy Committee decided to keep the policy rate unchanged at 27 per cent,” the statement said.
On the outlook, Deloitte in its report said, the Ghanaian economy will pick up, driven by rising business confidence and economic activities.
It furthered that the strengthening of the local currency will help stabilise prices further.
In Nigeria, the MPC raised the MPR to 27.50% for the 6th time since January 2024, amidst rising inflation.
The concerns were higher fuel prices impacting the cost of production and distribution costs, persistent exchange rate pressure, reflecting high forex demand and elevated core inflation.
Deloitte warned that there will be an implication of further squeeze in disposable income, reduced money supply but tighter credit access and increased cost of borrowing and loan defaults.
Apparently, the accounting firm is upbeat about the resilience of the banking system despite exogenous and endogenous macroeconomic headwinds
Deloitte Africa will mark International Fraud Awareness Week by hosting its 2024 Financial Crime Symposium on November 20, focused on the theme, “Cryptocurrency and Financial Crime: Navigating the New Frontier of Digital Threats.”
The symposium aims to bring together industry thought leaders to offer actionable strategies in the fight against financial crime, with an emphasis on cryptocurrency-related risks.
The event will feature discussions led by experts and provide networking opportunities designed to foster collaboration among industry executives, regulators, and cybersecurity professionals.
Attendees will engage in discussions on emerging threats, sharing best practices for preventing and detecting digital financial crimes.
Following the symposium, Deloitte Ghana’s Financial Advisory Department will host a three-day training on Fundamentals of Digital Forensics and e-Discovery from November 27-29.
The training will cover core topics including digital forensics basics, electronic discovery processes, mobile device forensics, and an overview of forensic tools.
Targeted at legal practitioners, IT auditors, finance managers, and cybersecurity professionals, the training will offer hands-on experience in data acquisition, preservation, and forensic analysis techniques.
“Our program provides practical skills in mobile device forensics and data recovery techniques essential for identifying data theft, unauthorized access, and supporting legal proceedings,” said Nii Asafoatse Abbey, Training Program Lead and Associate Director at Deloitte Ghana.
Digital forensics, he noted, is increasingly crucial in uncovering fraud, cyberattacks, and employee misconduct within corporate and legal contexts.
Deloitte, a global leader in audit, consulting, and financial advisory services, continues to support clients and communities in navigating the complexities of today’s digital landscape, reinforcing its commitment to impactful service.
A recent survey by Deloitte has revealed that businesses in Ghana’s upstream oil and gas industry expect their investment decisions, particularly in waste management, to be influenced by the introduction of the emissions levy.
The levy, which was introduced in the 2024 National Budget under the Emissions Act 1112, imposes a tax on carbon dioxide equivalent emissions across several sectors, including oil and gas, construction, manufacturing, mining, and electricity generation.
According to the survey, 40% of respondents indicated that the emissions levy would drive their investments towards cleaner technologies.
Awareness of the Ghana Revenue Authority’s levy is also high, with 65% of businesses indicating they are familiar with the policy.
When asked about the importance of environmental issues, respondents gave an average rating of 4.18.
Waste management was identified as a top priority, with 65% of companies focusing on it, while 42% are prioritising renewable energy use.
Although 56% of respondents are aware of the benefits of reducing their carbon footprint to claim emissions credits, only 36% reported familiarity with their own company’s specific carbon footprint.
The survey also revealed that nearly all respondents (98%) believe it is crucial for companies to publicly disclose their environmental, social, and governance (ESG) practices.
This emphasis on transparency is highlighted by an average rating of 4.22, underscoring the importance businesses place on revealing their environmental and social impacts.
A new report has position Ghana’s economic outlook in the short to medium term as favorable as against economic giant of West Africa, Nigeria.
Base on the first quarter and half year economic trajectory, Deloitte in its West Africa economic outlook report released this month, praised the performance of the Ghanaian economy so far.
The report emphasised that, Ghana’s 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.
Also, 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, The international accounting and auditing firm stated in its West Africa economic outlook, August 2024 report.
However, it added there are downside risks emanating from the forthcoming general elections in December, high inflation, and elevated interest rates, all of which are weighing on private consumption and investment spending in 2024.
“However, a faster pace of recovery is expected from 2025 onward, driven by an anticipated decline in consumer prices, which will trigger a further cut in interest rates. In addition, mining output is estimated to rise, supported by increased output from the recommissioned Bibiani gold mine and production from the Ahafo North gold mine.
“The country’s cocoa output—one of the main drivers of the economy—will encounter volatility as a result of climatic conditions, smuggling, diseases (cacao swollen shoot virus and the black pod, for instance), and global commodity price fluctuations,” the report said.
Rising consumer prices have been one of the major macroeconomic challenges plaguing developing countries, especially in West Africa. While inflation in Ghana now seems to be on a downward slope, it rages on in Nigeria, it added.
West Africa’s macroeconomic environment has remained challenging due to several factors, the prominent ones being high inflation, a high interest rate environment, currency weakness, and elevated debt levels.
These challenges are likely to persist for the rest of 2024, driven by ongoing market reforms, weak consumer demand, and low foreign investment. As a result, consumers will likely face further declines in purchasing power, and businesses are likely to experience higher operating costs. 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. In July, the International Monetary Fund (IMF) revised its 2024 growth forecast for Nigeria to 3.1% from its April forecast of 3.3%.1 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.2 Meanwhile, the IMF projects Ghana’s economy will grow 2.8% in 2024 and 4.4% in 2025.3
Economics
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Around 50 countries across the world are heading to the polls this year—or have already done so—including West African countries.4 Ghanaians are going to the polls this December. 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 growth rates to remain tepid in 2024
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.5
Nigeria
Nigeria’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% (figure 1), 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%.6
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.
Nigeria will likely experience tepid short-term growth due to ongoing macroeconomic headwinds. Ongoing public protests, targeted against rising cost of living, have been largely predominant in the northern regions of the country, with pockets of unrest in some southern states as well. Further degeneration—especially in the south, the commercial belt of the country—could severely affect the nation’s overall economic output.
The IMF recently reduced its 2024 growth forecast for Nigeria, but there is some good news: It retained its 2025 growth forecast at 3%.7 Ongoing pro-market reforms will likely have positive effects on the economy, contributing to growth in 2025 and onward.
Looking beyond 2025, economic output is expected to accelerate as inflationary pressures start to ease and monetary conditions follow suit. An increase in oil-refining output, driven by Dangote’s refinery, operations resuming at government-owned refineries, and the possible entry of other private sector players will likely boost the country’s net exports. This could significantly propel economic growth in the medium term as fuel imports decline, while fuel exports and domestic crude production both increase.
Ghana
Ghana, compared to Nigeria, appears to have stronger growth prospects. 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 (figure 2). 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 2023.8
The outlook for the Ghanaian economy is favorable in the short to medium term. However, there are downside risks emanating from the forthcoming general elections in December, high inflation, and elevated interest rates, all of which are weighing on private consumption and investment spending in 2024. However, a faster pace of recovery is expected from 2025 onward, driven by an anticipated decline in consumer prices, which will trigger a further cut in interest rates. In addition, mining output is estimated to rise, supported by increased output from the recommissioned Bibiani gold mine and production from the Ahafo North gold mine.9 The country’s cocoa output—one of the main drivers of the economy—will encounter volatility as a result of climatic conditions, smuggling, diseases (cacao swollen shoot virus and the black pod, for instance), and global commodity price fluctuations.
Inflation: Upside risks persist in the region
Rising consumer prices have been one of the major macroeconomic challenges plaguing developing countries, especially in West Africa. While inflation in Ghana now seems to be on a downward slope, it rages on in Nigeria.
Nigeria
Inflationary pressures in Nigeria are a result of structural issues, as well as external imbalances. A food crisis, heightened insecurity, a misaligned exchange rate and dollar illiquidity, and supply chain disruptions are some key domestic contributors. At the mid-year mark, Nigeria’s inflation rate was 34.19%, year on year. Food inflation, the major driver of the uptick, is trending above 40% year on year, while core inflation was up 27.4%, year on year, in June (figure 3).10 Government reforms implemented have exacerbated the pressure on consumer prices and the cost of doing business due to the inflationary impact. Purchasing power has been severely eroded, and this has led to reduced consumer spending. Business profit margins have also thinned significantly, with many companies struggling to stay afloat.
President Bola Tinubu has approved a new minimum wage of 70,000 naira per month,11 which is over 130% higher than the current level of 30,000 naira. While this is a welcome development, the more pertinent question is how the state government will afford the new wage level, especially since most states are currently struggling to pay their workers. This implies that state governments will have to either borrow more or increase their revenue generation to bridge the fiscal gap. The senate has approved a supplementary budget of 6.2 trillion naira, of which three trillion naira would be used to finance the minimum wage. This has increased the FGN 2024 Appropriation Bill to 34.98 trillion naira and will further widen the fiscal deficit beyond the 3.4% of gross domestic product projected in the 2024 budget.12
The upward trend in the cost of goods and services is estimated to continue for the rest of the year. The government has a year-end inflation target of 21.4%. This is highly optimistic and may not be achieved, especially if policy implementation lags are considered. In addition, for a country that is highly import-dependent, the role of the exchange rate cannot be overemphasized.
The naira witnessed severe volatility in the early part of 2024 before stabilizing at around 1,500 per US dollar. The local currency touched a high of 1,050 per US dollar and a low of 1,800 per US dollar at the parallel market in the first six months of the year. In the official market, the local currency experienced similar volatility, closing at 1,510.10 per US dollar at the mid-year mark.13
The Central Bank of Nigeria’s foreign exchange measures, which include introducing a “willing buyer, willing seller” market, clearing of foreign exchange demand backlog, and releasing new regulations guiding the operations of the bureau de change’s foreign exchange subsegment, are restoring investor confidence in the economy. If the pace of reform is sustained, it should provide some stability in the market. More importantly, new dollar supply sources will be needed to augment the policies and whittle down speculative demand. Nigeria’s oil production level is also projected to increase marginally to 1.3 million barrels per day in 2024 and 1.35 million barrels per day in 2025,14 from 1.23 million barrels per day in 2023.15 This is expected to boost the country’s export proceeds and dollar supply.
A more stable naira will play a major role in dampening inflationary pressures in Nigeria. An average inflation rate above 30% is expected in 2024.16 However, this is likely to taper toward an average of 23.8% in 2025 due to base effects, and the impact of ongoing monetary tightening.17 Upside risks to this forecast will arise from a possible increase in taxes and tariffs as the government intensifies its revenue mobilization efforts. The government has recently suspended tariffs, duties, and taxes on some imported grains for 150 days to ameliorate the effects of the food crisis on consumer welfare.18 The implementation of other major reforms may also be put on hold in the short term to reduce the contracting effect on consumer pockets.
Ghana
Inflation in Ghana has been on a steady decline since August 2023, with one or two months standing out from the trend. The deceleration has been driven by a tight monetary policy stance, ongoing fiscal consolidation of the government, and relatively stable transportation fares. Ghana’s annual inflation rate has fallen from a record high of 54.1% in December 2022 to a 26-month low of 22.8% in June 2024 (figure 3).19
The disinflationary trend in Ghana is expected to continue over the second half of the year. The Bank of Ghana has a year-end inflation target of 15% (plus or minus 2%). While this appears probable to achieve, there are upside risks, which largely arise from election spending and bouts of local currency volatility. In the first half of 2024, the Ghanaian cedi lost over 20% of its value against the US dollar, due to a mismatch in foreign exchange demand and supply.20 Demand has been growing for US dollars to purchase petroleum products, fuel, and other consumer goods.
On the other hand, cocoa earnings—one of the country’s major sources of foreign exchange—have declined by about 49% in the first four months of the year, due to poor harvests and challenges like smuggling.21 The good news is that the government has made significant progress with its debt-restructuring deal with official creditors, which should fast-track the disbursement of another tranche of funds from the IMF.
The anticipated inflow should shore up external buffers and provide support to the Ghana cedi. This will, in turn, have a positive impact on imported inflation. As of the end of June, Ghana’s gross external reserves were at US$6.9 billion, providing coverage for 3.1 months of imports.22
The anticipated increase in election-related spending will increase the level of money supply in the system, which could spur demand-pull inflation.
Policy environment in West African economies
Monetary policy
The monetary policy environment in West Africa has been contractionary for the last two years, owing to rising inflationary pressures. The Central Bank of Nigeria has raised its benchmark interest rates by a cumulative 15.25% since it commenced its tightening stance in May 2022. As of July 2024, the monetary policy rate in Nigeria was 26.75%.23 The Bank of Ghana, on the other hand, raised its rate by an aggregate of 13% between May 2022 and December 2023, before implementing its first rate cut of 100 basis points in January 2024—Ghana’s monetary policy rate stands at 29% as of July 2024.24
Nigeria
Monetary policy will remain contractionary in Nigeria as long as inflationary pressures persist. The Central Bank of Nigeria has indicated that interest rates will remain elevated as long as inflation continues to rise.25 However, the pace of increase may slow to allow for the impact of previous hikes to take effect on the market.
Higher interest rates have negative implications for these markets in the short run, such as a higher cost of funds and reduced credit to the private sector, which will hinder the growth of the overall economy. We also expect to see a continued shift away from equities toward interest-bearing securities. The effectiveness of raising interest rates to curb inflation in Nigeria will require fiscal policy support, as the main driver of inflation is food inflation.
Ghana
Ghana, on the other hand, may cut interest rates further in the second half of 2024. The rate cuts are likely to be tapered to limit the risk of a resurgence in inflationary pressures. This is because a higher level of money supply is expected as a result of election spending. Beyond 2024, we expect more aggressive rate cuts as inflation falls towards single digits. This will spur an increase in domestic demand and the overall aggregate output of the Ghanaian economy.
Fiscal policy
Fiscal policy in West Africa revolves around two main themes, revenue mobilization and debt restructuring/sustainability. Nigeria and Ghana both have high debt profiles.
Ghana has an ongoing debt-restructuring plan that has helped it secure an IMF package and disbursements alongside securing agreements with its lenders.
Nigeria, on the other hand, is facing rising debt levels amid low revenue generation. The widening fiscal gap caused by the new minimum wage will have to be bridged by either new borrowings or an increase in revenue. Generating more revenue implies higher taxes and tariffs, which has an inflationary effect.
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.
In the face of Ghana’s cyclical economic woes, a Chartered Accountant and Information System Auditor has called on the government actors and private players to ensure long-term macroeconomic stability for the country.
The accountant believes, such is very critical for planning, forecasting, and overall building of a vibrant economy that would not only creates jobs but also boosts the per capita income of the people and accelerates poverty reduction.
The Country Managing Partner of Deloitte Ghana opines that, Ghana has reached a stage where all must chart a common course toward building hope and confidence in the economy and position it for a brighter future.
“Indeed, the International Monetary Fund has assured us that the economic outlook for Sub-Saharan Africa including Ghana is gradually improving, indicating that growth will rise from 3.4% in 2023 to 3.8% in 2024″, Daniel Kwadwo Owusu said while speaking at the launch of the 8th Ghana CEO Network Summit and the Ghana Excellence Awards last week.
“For us, it is a welcome news as inflation and other macroeconomic indicators are expected to improve this year. However, we need to do more as a country to achieve long-term macroeconomic stability.
“Long-term macroeconomic stability is very critical for planning, forecasting, and overall building a strong and vibrant economy that would not only creates jobs but also boosts the per capita income of the people and accelerates poverty reduction”, he stated.
Emphasising on Deloitte’s brand positioning statement “Embarking on a Transformational Business Journey” he added that, “As Knowledge Partner of this summit, we will continue to collaborate with industry leaders, policymakers, and other stakeholders to build a robust, inclusive, and sustainable future for all. We are excited to bring our expertise in these areas to the table”.
“At Deloitte, it is all about making an impact that matters, setting high standards of excellence and achieving them, and helping our clients realise their ambitions. We also create connections with our clients, the communities, and the leaders far and wide to make an impact that matters the most, a reason we see the Ghana CEO Summit as an important tool to share our projects and programmes with a wider and larger audience.
Deloitte launched the Technology, Media, and Telecom Predictions for 2024, which hinged on four pillars – Generative Artificial Intelligence; Sustainability; Media, Entertainment and Sports as well as Technology and Telecom.
The Country Managing Partner said this is an insightful and educative piece that talks about the evolution of these spaces and the need for us to reposition our brands in line with the changing trends.
He noted that Deloitte is committed to sharing insights and best practices that can help Ghana and the broader region navigate complex issues and achieve their growth objectives.
As the global advocacy towards a transiting from carbon related energy uses (fossils) to a sustainable and greener energy sources (solar, wind hydro etc), the African continent face uncertainties with regards to adequate investments and policy reforms.
The imbalances in the system are capable of impeding efforts to reach the pace required to limit warming to 1.5 degree Celsius are a great deal to tackle. Definitely, much more needs to be done by various countries and regional bodies, including international development institutions, to help boost investment levels and bridge the widening regional divergences in the pace of energy transition investment.
In this regard, Deloitte, an assurance and advisory firm, has given its take on the approach Africa nations need to adopt to achieve effective energy transition. The international firm believes that the transition from traditional fossil fuels to cleaner energy needs to be done through a gradual process while adopting energy mix approach up to the year 2050. In a follow-up interview on the topic “Creating the perfect investment conditions for Foreign Direct Investments into the African energy sector: where is the money?” moderated by a partner at Deloitte at the just ended Africa Oil Week Conference in Cape Town, South Africa, Jenny Erskine noted that, Africa is partly ready for the transition agenda, in spite of the infrastructure and investment challenge it has, the continent has the needed resources (sun, wind, cobalt, lithium) that are greener and can be tapped easily to start the process to greener energy.
“Mining the cobalt, lithium and other minerals could pollute the environment, but it can lead to the net zero carbon emission as the output of those minerals are needed to manufacture materials needed for the energy transition”, the Oil and Gas Sector Leader for Deloitte Africa, Jenny Erskine said in an interview.
However, Claude Illy, also a partner at Deloitte with finance expertise and based in South Africa, reiterated in the zoom interview that, effective mining policies must be looked at and streamlined to ensure better mining mechanisms are put in place to protect the environment and regulate the industry.”
While adding that, “governments must take action to create enabling environments for investors to ensure transparent, fair investments that favors both parties.”
Looking at option of a win-win investments opportunities, Ms Erskine elaborated on a Public Private Partnerships (PPPs), Build Operate Transfer (BOT), Equity financing (for smaller projects) and debt financing (for bigger projects, from commercial banks, export credit agencies, bilateral and/or multilateral institutions) and long-term off-take agreements (partially guaranteed by multilateral banks in difficult to finance countries) as a possible means to conclude a favorable greener energy projects to aid the steps and strategies towards achieving the global agenda.
Meanwhile, taking a critical look at some of the disadvantage of the agenda, Africa nations might have to leave more of its untapped fossil fuels in the earth and waters as many nations are yet to even start exploration activities on their potential oil and gas wells both onshore and offshore. Also, Africa as known for exporting its raw materials, it will lead to creating a huge numbers of unemployment as the mineral resource mining and production companies fold up in no time to pave way for greener energy generation projects.
Ensuring clear, transparent, and consistent policy, and maintaining a stable regulatory environment in Africa’s most prominent mining jurisdictions is key to attracting international mining capital at a scale commensurate with the continent’s potential. Building on that foundation, solid governance, transparency, minimum red tape, an enabling business environment and trust among industry players and stakeholders will help to change common perceptions about Africa.
Botswana, Ghana, South Africa, and Zambia, amongst others, have declared themselves as “open for business” to mining companies and foreign investment, and demonstrate that openness by their overhaul of mining legislation, and visible stakeholder engagement efforts, even as perceived investment attractiveness remains low.
The Africa Oil Week and the call for ‘just energy transition’
This year’s Africa Oil Week saw the continent define an assertive new position that determines for itself how best to balance sustainability with its own development needs.
The African Union became an official partner of Africa Oil Week (AOW), helping to make the event a triumph for African unity, and promoting Africa’s ability to assert itself and define its own energy future.
The continent spoke with one voice to address pressing challenges related to combating energy poverty on the continent and defining what a just transition means in the African context.
“It’s important for us to come together as Africans to discuss and solidify what is best for us among ourselves so that we can move forward,” says Rashid Ali Abdallah, Executive Director for the AU’s Africa Energy Commission (AFREC).
“What we really need in Africa is investments, and this conference brings together all of the investors, all the developers and all of the member states that can make that business happen,” he continued.
A major theme throughout this year’s event was the need to define the “just energy transition” for the African context, and for Africans to make these assertions for themselves, rather than following a western energy-transition agenda that does not apply to the continent.
“Energy transition for Africa is to transition from a position of ‘no energy’, and should be based on the African position of promoting access to energy,” said Ali Abdallah.
Lack of strong policies
Edmond Kombat, Director of Research & Finance, Institute for Energy Security, has cautioned that, the lack of strong policies, subsidies, incentives, and regulations that favour renewable energy technologies is what will hinder its wide growth in the years ahead.
“To attract investors and reduce the cost of renewables, the market needs clear policies and legal procedures, incentives and subsidies. While global cooperation and coordination is critical, domestic policy frameworks must urgently be reformed to streamline and fast-track renewable energy projects and catalyze private sector investments.
“In the words of IEA Executive Director, Fatih Birol: “Cutting red tape, accelerating permitting and providing the right incentives for faster deployment of renewables are some of the most important actions governments can take to address today’s energy security and market challenges, while keeping alive the possibility of reaching our international climate goals”, the energy expert retorted in an article published recently on the topic “A world of clean, renewable energy is close to realization, but …..”
Mr Kombat, further shared that, over the past three years, renewable energy has recorded some interesting development within the broader energy system, with a promising uptick in growth, leading to a small reduction in global CO² production from the electricity sector overall, as noted by the International Renewable Energy Agency (IRENA).
The International Energy Agency’s (IEA’s) in its report, “World Energy Investment” published in May 2020, is a description of a drastically changed energy markets in the wake of the coronavirus pandemic. Also, the IEA’s Global Energy Review 2020 report indicated that renewable energy has so far been the energy source most resilient to Covid-19 lockdown measures.
Consequently, according to data released in April 2021 by the IRENA, the world added more than 260 gigawatts (GW) of renewable energy capacity in 2020 despite Covid-19 pandemic, exceeding expansion in 2019 by close to 50 percent. Renewable electricity capacity additions broke another record in 2021, despite the continuation of Covid-19 induced logistical challenges and increasing prices for new solar PV and wind installations. The world added a record 295 gigawatts of new renewable power capacity in 2021, overcoming supply chain challenges, construction delays and high raw material prices, according to the International Energy Agency’s (IEA’s) latest Renewable Energy Market Update.
As we know today, renewables were the only energy source that posted a growth in demand in the first quarter of the year 2022.
The IEA forecast global capacity additions to rise this year to 320 gigawatts; equivalent to an amount that would come close to meeting the entire electricity demand of Germany or matching the European Union’s total electricity generation from natural gas. Solar PV is on course to account for 60 percent of global renewable power growth in 2022, followed by wind and hydropower. Going forward, the IRENA estimates that 90 percent of the world’s electricity can be produced from renewable energy sources by 2050.
The IEA projects that spending on renewables in 2022 will exceed the record US$440 billion invested in 2021. Global clean energy spending is expected to surge 12 percent in 2022, reaching US$1.4 trillion as the world pours money into renewables, electric vehicles and energy efficiency. The sustained progress in demand growth and spending is yet another proof of renewable energy’s resilience and acceptance.
But while renewables continued to be deployed at a strong pace even during the Covid-19 crisis, there is looming market uncertainties increasing the challenge to grow clean renewable energy at the expected pace capable of meeting long-term climate and sustainability goals. The IEA noted in 2021 that the continuing decrease in cost trends alone will not shelter renewables projects from a number of challenges.
The pace of economic recovery, heightened pressure on public budgets and the financial health of the energy sector as a whole further exacerbate already existing policy uncertainties and financing challenges.
