Global Economic Shifts and Africa’s 2025 Outlook

The year 2024 has been characterised by economic difficulties across the globe. Whether nations are affluent or struggling, they have encountered reduced economic activity and alarming cash deficits. Even though wealthier countries seem to have been less impacted by the crisis owing to their superior industrial and economic systems, it is clear that the repercussions have been much harsher for African nations. Nevertheless, the years 2025 and 2026 distinctly indicate that there will be favorable advancements corresponding to the economic strategies and initiatives implemented.

SOURCE: IMF

SOURCE:IMF

In contrast to Western nations, China has experienced significantly fewer inflation-related challenges. This stability has allowed it to enhance its investments and presence in Africa more robustly. While the escalation of maritime shipping fees has driven up the unit costs of Chinese merchandise, they still excel with their competitive pricing for exports.

2025 Forecast for Inflation on a Global Scale :

• Core inflation is likely to persist
• Besides, the likely policies of the US president-elect may result

to a rebound of inflation due to:

1. Growing geopolitical challenges caused by trade friction that is likely to lead to higher tariff rates.
2. Adjustments in diplomatic approaches that might cause a rise in the cost of commodities.
3. Decreased tax rates or heightened government investment that may contribute to inflationary pressures.

Influences that are likely to hinder progress in 2024 : 

1. Geopolitical issues, particularly the ongoing strife in the Middle East and trade tensions, have significantly impacted supply chains and caused energy price instability.
2. Challenges in the property market, coupled with feeble demand, have obstructed the recovery of growth in China.
3. Ecological challenges resulting in more frequent natural disasters and influencing the stability of food supplies.

Economies in Africa are still grappling with inflation levels in the double digits : 

While several African nations are expected to experience growth in 2025, this progress could be obstructed by adverse effects stemming from the global economy : 

• Exchange rate fluctuations due to the type of goods consumed and produced.
• Disruptions within the supply chain resulting in : 

1. Energy price increase

Charges for consumable products

2024, Engines of Economic Growth : 

• The implementation of the AfCFTA has boosted trade activities across African countries.
• Elevated prices for commodities have led to a rise in the exploration and exportation of natural resources.
• Enhanced worldwide economic circumstances have resulted in a surge in demand for African goods.
• A decrease in the inflation rate has led to a rise in consumer purchasing ability and spending.

Domestic Economies : 

1. The services sector is expected to dominate the non-oil sector growth with the sector growth driven by: Banking, Insurance, Telecommunication, Construction, Real Estate, and Mining. 
2. It is predicted that a reduction in inflation and a consistent exchange rate will rejuvenate the sectors of industrial and consumer products.
3. The farming industry is anticipated to flourish because of : 

• Reliability of the currency exchange rate.
• Cost-effective travel options utilising compressed natural gas.
• Boost security levels.
• Budget-friendly credit solutions.

1. Improved safety protocols are expected to lead to a prosperous future for the oil market.

Local Economic Conditions – Foreign Exchange Rate : 

Analysis of the elements affecting exchange rates in the year 2024 : 

• A rise in speculative endeavors caused by a lack of adequate reserves.
• Diminished production levels and sales of crude oil.
• Decreased foreign exchange entry through direct investments from abroad.
• The demand for foreign exchange has escalated due to the categories of items and services that are manufactured and utilised.
• Escalating inflationary pressures.

2025 Q1: Most Favorable Forecast :

• Because of depreciation, there has been a decrease in the interest in studying abroad, contributing to a sense of stability.
• Insufficient interest in foreign exchange from businesses because of:

1. Limited production output
2. Many firms are increasing their stock levels in the last quarter of 2024

• Expansion of oil production levels.
• The CBN’s initiatives aimed at reducing speculation and enhancing transparency through various measures : 

1. The launch of a digital trading platform aimed at improving clarity and openness.
2. Action taken by selling U.S. dollars to currency exchange offices.

Elements that could lead to a decrease in inflation – ideal situation :

• Reliability of the currency exchange rate
• Affordable loan rates for those in farming.
• Embracing Orthodox approaches to economic governance.
• Endorsing the effort to boost regional production.

The performance of the stock market in 2025 is expected to be marked by a bullish trend thanks to: 

• New Fundings 
• Portfolio Rebalancing
• Individuals putting their money into assets are favoring those with enticing returns and solid performance.
• Transitioning investments among various industry segments.

In 2024, a number of African countries responded to investor perceptions by offering bonds that had shorter terms and more attractive interest rates. With improvements in economic indicators, the governments will likely introduce longer-term bonds, reflecting a resurgence of investor confidence in the economy. In spite of this transition, it is expected that both short-term and long-term rates will continue to be elevated, as they have a positive relationship with the policy rate, which is likely to stay in double digits to address inflation concerns.