Despite 3.7% Growth Forecast Africa Faces External Risks Challenge – AfreximBank

The Africa Export-Import Bank (AFREXIM) has said the trade war between the United States of America and China as well as the OPEC adjustments could put pressure on African economies such as Nigeria who are reliant on commodity exports.

The bank in its Monthly Development in the African Macroeconomic Environment report for January noted that while the African economy is expected to improve in 2025, external risks still pose a challenge.

According to the report, growth on the continent is forecasted to rise from 3.4 per cent in 2024 to 3.7 per cent in 2025 and 4.0 per cent in 2026, driven by recoveries n major economies such as Nigeria, Egypt, and South Africa, as well as deeper integration under the African Continental Free Trade Area (AfCFTA).

However it noted that external risks will set the stage for how African nations must navigate their economic strategies in 2025.

“China’s economic slowdown, geopolitical tensions, and commodity market volatility further cloud the outlook. The U.S. China trade conflict, OPEC+ production adjustments, and climate-related supply shocks could pressure African economies, particularly those reliant on commodity exports.”

It furthered that inflation remains a concern in many countries in Africa with average inflation rate, which stood at 8.6 per cent in 2024, is projected to decline to 7.2 per cent in 2025, helped by stabilising global supply chains and domestic monetary adjustments.

It however raised concerned on the inflation in Nigeria which stood at 34.8 per cent in December driven by rising food and energy costs amidst depreciating currency as well as a tax reform.

Noting that the value of the naira had depreciated by 70 per cent last year, the AFREXIM report said currency fluctuations, driven by the strong U.S. dollar and shifting global capital flows, remain a key risk for many African economies.

Stating that global economic transformation have compelled African nations to rethink their economic strategies fostering new alliances and diversifying trade and investment partnerships, it said ” As traditional economic powerhouses reassess the global priorities Africa is emerging as a critical hub for investment, offering vast opportunities across industries such as energy technology manufacturing agriculture and infrastucture.

“However, investors must navigate structural challenges
including currency volatility regulatory uncertainties. and fiscal constraints. Despite these hurdles, Africa s evolving economic landscape presents a compelling case for strategic investment, particularly for partners seeking growth markets.”

It furthered that to achieve sustained economic resilience, strategic policy reforms, enhanced fiscal discipline, and strong political commitment are essential “Governments must focus on diversifying revenue sources, improving governance, and fostering innovation-driven industries to mitigate risks and
unlock long-term growth potential.”