Africa

Africa Economics Weekly

FX orthodoxy in Nigeria? Strikes in SA, Ethiopia’s conflict

Comments by Nigeria’s vice president endorsing a more market-based exchange rate regime reflect growing concern about the distortionary effects of the current FX system, but there is no evidence that key officials backing the existing currency arrangements are also shifting tack. In South Africa, ongoing industrial action in the steel industry will probably dampen manufacturing output in Q4, in another hit to the recovery in the sector and the wider economy. Finally, escalating tensions in Ethiopia raise the spectre of more severe strains in the balance of payments.

15 October 2021

Africa Data Response

Nigeria Consumer Prices (Sep.)

The drop in the headline inflation rate in Nigeria, to 16.6% y/y in September, will ease pressure on the central bank to raise rates and allow policymakers to focus on supporting the economic recovery.

15 October 2021

Africa Data Response

South Africa Activity Data (Aug.)

South Africa’s hard activity data for August point to a bumpy recovery following a large hit to the economy in July, adding to reasons to think that interest rates are unlikely to be raised imminently.

13 October 2021

Key Forecasts

Table 3: GDP & Consumer Prices (% y/y)

Share of

World 1

2009-18

Ave.

GDP

Inflation

2020

2021f

2022f

2023f

2020

2021f

2022f

2023f

Nigeria

0.81

4.4

-1.8

3.0

3.0

2.8

13.2

16.8

13.8

12.5

South Africa

0.54

1.5

-6.4

4.3

3.5

2.5

3.3

4.0

3.8

4.0

Ethiopia2

0.21

9.7

6.1

2.0

7.0

7.0

19.9

20.3

21.8

11.5

Kenya

0.18

5.6

-0.4

6.5

6.0

5.5

4.8

6.0

5.3

5.5

Angola

0.16

2.4

-5.4

1.3

4.5

2.0

22.3

25.0

19.3

15.3

Ghana

0.13

7.0

0.4

3.8

6.0

5.5

9.9

9.0

8.3

7.3

Tanzania

0.12

6.5

2.0

6.5

5.5

5.0

3.3

3.8

4.5

4.8

Côte d'Ivoire

0.11

6.1

2.3

7.5

7.0

7.0

2.4

4.3

1.3

2.0

Uganda

0.08

5.3

-0.8

4.8

5.0

5.5

2.7

2.8

4.0

4.3

Zambia

0.05

5.6

-3.0

3.3

2.5

2.3

15.7

23.3

13.3

11.0

Botswana

0.03

3.7

-8.5

8.0

4.5

5.8

1.9

6.0

4.3

3.8

Mozambique

0.03

3.7

-1.2

3.0

4.0

4.5

3.1

5.5

5.8

5.8

Rwanda

0.02

7.2

-3.4

8.3

7.3

8.5

9.9

1.0

4.0

4.3

Mauritius

0.02

3.7

-14.9

11.0

8.3

4.0

2.5

3.8

4.0

3.0

Namibia

0.02

3.4

-8.0

4.0

5.0

4.0

2.2

4.0

4.5

4.3

Sub-Saharan Africa

2.5

4.2

-2.2

4.0

4.4

3.9

9.7

11.5

10.0

8.5

Sources: Refinitiv, National Sources, Capital Economics. 1) % of GDP, 2020, PPP terms (IMF estimates); 2) Fiscal Years.


FX orthodoxy in Nigeria? Strikes in SA, Ethiopia’s conflict

Africa Economics Weekly

17 October 2021

Our view

Extremely low vaccination rates, combined with tight fiscal policy, a slow return of tourists, and falls in commodity prices mean that economic recoveries across Africa will lag behind other emerging markets. In South Africa, an earlier outburst of violent unrest is likely to make it harder for policymakers to keep their balance on the fiscal tightrope. And monetary policy will probably remain more accommodative than most analysts currently anticipate. Meanwhile, ever more stringent currency controls in Nigeria will increasingly hurt economic activity as the risk of shortages grows and inflationary pressures mount. We don’t think that the government will kick its deficit monetisation habit, worsening the country’s inflation problem. Elsewhere, addressing underlying debt problems will remain challenging in Zambia, Ethiopia and Ghana.

Latest Outlook

Africa Economic Outlook

Lagging behind

Vaccination campaigns across Sub-Saharan Africa will continue to struggle, leaving the region vulnerable to renewed virus outbreaks. This, combined with tight fiscal policy, a slow return of tourists and falls in commodity prices means that economic recoveries will lag behind those in other parts of the world. GDP across most of the region is likely to stay well below its pre-crisis path over 2021-23.

5 August 2021