The International Monetary Fund (IMF) predicts that South Africa is poised to surpass Nigeria and Egypt as the largest economy in Africa next year due to a decline in oil production and the depreciation of the naira. According to the IMF’s World Economic Outlook, South Africa’s gross domestic product (GDP) will reach $401 billion in 2024, while Nigeria’s will be $395 billion and Egypt’s $358 billion.

This change is expected to be temporary, with South Africa holding the top spot for only a year before being overtaken by Nigeria, and subsequently slipping to third place behind Egypt in 2026. Nigeria’s economic performance has been affected by factors such as falling oil production, high inflation, and a devalued naira.

Recent policy reforms in Nigeria, including changes to the foreign exchange system and the removal of costly gasoline subsidies, are aimed at addressing the country’s financial challenges. Although these measures have had a short-term impact, the IMF predicts that Nigeria’s GDP will grow by 3.1% in 2024, compared to 2.9% in 2023.

However, Bloomberg economist Yvone Mhango suggests that South Africa’s brief emergence as Africa’s largest economy in 2024 is primarily due to the depreciation of Nigeria and Egypt’s GDP in dollar terms.

Egypt has devalued its currency three times this year due to a shortage of foreign exchange, resulting in a significant loss of value in its currency against the dollar. The government obtained a $3 billion IMF package this year, which calls for a more flexible currency rate.

The IMF reviews for Egypt, originally scheduled for March and September, have been postponed. Successful evaluations could lead to a $1.3 billion resilience fund, approximately $700 million in delayed loan tranches, and significant Gulf investments.

South Africa’s economy is expected to grow by 0.9% in 2023 and 1.8% in 2024, with potential for faster growth of 2.5% to 3% if logistical challenges, electricity issues, and other reforms are addressed. For Nigeria to achieve the projected GDP growth, measures such as restoring oil output, addressing security concerns, and improving the power sector are essential. Infrastructure challenges and power outages are also limiting economic growth in the country.