In focus Africa

General economic overview

African countries are showing significant recovery, but further growth will be needed to restore GDP to pre-pandemic levels across the continent.

Rates of inflation are above target rates in most regions, with higher transport, food and housing costs forcing banks to increase interest rates.

In Nigeria, inflation has increased to 17 percent and interest rates to 13 percent. High rates of inflation, a high dependence on imports and weakening currencies are creating difficult economic conditions.

Construction sector performance

Nigeria has also seen construction values fall over the past two years. A major constraint is the cost of construction, which has been driven higher by supply-chain bottlenecks and rising energy costs. Nigeria experienced a 30 percent rise in construction costs in 2021 and is expected to increase further.

The volatile pricing backdrop means the risk for contractors is elevated. Construction project schedules regularly increase as a result of material supply shortages. Project teams are having to take measures to surmount supply challenges including early procurement, early payment to contractors, or having contracts in which the client sources and issues material themselves.

Progress of the environmental agenda

Growth in renewable energy is attractive for African countries because they are rich in hydro, solar and wind, and the use of renewables promotes improved energy security compared with imported fossil-fuel sources.

Furthermore, there are many regions where the local population still has no access to electricity, and decentralised renewables offer the opportunity to provide cheap local electricity.

There are numerous solar and wind projects underway across the continent, with access to capital being the main deterrent. Organisations such as the International Renewable Energy Agency (IRENA), however, are putting in place the frameworks, mapping and financial structures essential to delivering large-scale renewable energy across the continent.

The government of Nigeria has launched the Solar Power Naija project to enable up to 5 million homes currently not connected to the grid, to obtain access to home-based solar or connection to mini grids.

Future outlook

Vaccination rates remain some of the lowest worldwide and there are continued threats of outbreaks or new variants putting pressure on fragile health systems.

Some of the largest countries are the ones experiencing the slowest growth. According to the IMF, sub-Saharan Africa would need to double its forecast growth rate to match the growth seen in the post-pandemic period in other advanced economies. Financing conditions are becoming more difficult as debt levels have increased, and foreign investment is being deterred by high rates of inflation.