Africa’s inflation rate is set to fall from 8.6% in 2024 to 7.2% in 2025, according to the latest Afreximbank report.
This projection, outlined in the February 2025 edition of the bank’s Research Monthly Developments in the African Macroeconomic Environment, marks a hopeful shift in the continent’s economic outlook.
The report notes a strong correlation between inflation and interest rates in African economies, particularly during periods of high inflation. As inflationary pressures ease, central banks may have more flexibility to adjust monetary policies. This could stimulate economic growth, improve consumer purchasing power, reduce borrowing costs, and attract more investment across the continent.
“Economic growth is not only expected to stabilize but could also boost consumer confidence,” said Afreximbank’s chief economist. “As central banks gain more room for policy flexibility, the benefits will be felt throughout the economy.”
However, the report highlights that economic performance remains fragile. While 18 out of 29 monitored African economies outperformed expectations in 2024, only 11 are expected to continue this upward trajectory in 2025. Political instability, global economic fluctuations, and regional uncertainties continue to present significant challenges to sustained growth.
Commodity-Dependent Economies Face Additional Risks
For commodity-dependent nations, the report warns that price volatility poses an additional risk to economic stability. “Domestic policies will play a critical role in shaping future growth,” the report stated.
READ MORE: Lagos Offers 15% Discount on 2025 Land Use Charge for Early Payment
In early 2025, the strong US dollar has further complicated the economic landscape. Countries heavily reliant on imports and external debt have seen a rise in the cost of goods and increased debt burdens.
“Countries with weaker macroeconomic positions, such as Nigeria, Egypt, and Ghana, have faced sharper currency depreciations. These issues are aggravated by inflationary risks, fiscal deficits, and investor concerns,” the report read in part.
Despite these challenges, countries like Angola and Morocco have shown resilience. Both nations have leveraged strong foreign exchange reserves, sound economic fundamentals, and effective policies to weather external economic pressures.
Advice for African Governments
Afreximbank urges African governments to prioritize stabilizing inflation and ensuring exchange rate stability. A favorable investment climate is also crucial for navigating the ongoing economic uncertainties.
The report stressed the importance of addressing structural weaknesses and improving governance. Policies that encourage long-term economic resilience will be key to sustaining growth in the coming years.
Debt Concerns Persist Across the Continent
In related news, a new report by Afreximbank reveals that Nigeria, along with nine other African nations, accounts for 69% of the continent’s total external debt stock. Nigeria, South Africa, and Egypt hold the largest shares of Africa’s external debt, with Nigeria responsible for 8%, South Africa 14%, and Egypt 13%.
The report attributes the high levels of debt to factors such as underdeveloped financial markets, currency volatility, and the need for infrastructure financing.
