Ghana’s Growth Prospects
According to Deloitte’s August 2024 West Africa economic outlook, Ghana’s financial performance in early 2024 has shown promising signs.
The country’s economy grew by 4.7% year over year in the first quarter, primarily due to robust 6.8% growth in the industrial sector.
This growth contrasts favourably with Nigeria’s slower economic expansion.
Ghana is recovering from a debt-induced crisis. The ongoing restructuring of its US$30 billion debt and successful negotiations with the International Monetary Fund (IMF) have led to cumulative disbursements of US$1.56 billion since 2023.
The Bank of Ghana’s monetary policy measures have helped reduce inflation, and the outlook for the Ghanaian economy is generally favourable in the short to medium term.
However, risks such as the upcoming general elections, high inflation, and elevated interest rates could impact private consumption and investment.
The IMF’s more optimistic projection is that Ghana’s economy will grow by 2.8% in 2024 and 4.4% in 2025.
Key growth drivers include the mining sector, particularly with increased output from the Bibiani and Ahafo North gold mines.
However, Ghana’s cocoa sector faces volatility due to climatic conditions, diseases, and global price fluctuations.
Nigeria’s Economic Challenges
In contrast, Nigeria’s economic outlook remains less optimistic.
The IMF has revised Nigeria’s 2024 growth forecast to 3.1%, reflecting ongoing macroeconomic challenges.
Nigeria’s economy grew by 2.98% year on year in the first quarter of 2024, a slowdown from previous quarters.
Major sectors like finance and insurance showed strong growth, but agriculture needed more growth.
Inflation remains a significant issue, with Nigeria’s rate reaching 34.19% by mid-2024. This is driven by food prices, insecurity, and a misaligned exchange rate.
The naira has experienced severe volatility, impacting the cost of imports and contributing to the high inflation. Efforts to stabilize the currency, such as introducing a “willing buyer, willing seller” market, are ongoing, but challenges persist.
Public protests and unrest related to the cost of living could further strain Nigeria’s economic performance.
The government’s recent approval of a higher minimum wage and a supplementary budget to cover this increase may exacerbate fiscal pressures and inflationary trends.
Although oil production is expected to increase slightly, the broader economic environment remains constrained.
Regional Economic Context
West Africa faces macroeconomic headwinds, including high inflation, currency weakness, and elevated debt levels.
The region’s economic growth is projected to be subdued, and the IMF is reducing its growth forecasts for Nigeria and sub-Saharan Africa due to these ongoing challenges.
Ghana has a more favourable growth outlook than Nigeria, driven by effective monetary policy and structural reforms.
However, both countries must navigate significant economic risks and challenges to sustain and improve their growth trajectories in the coming years.
