Sub Sahara Africa: Country Risk Ratings

Nigeria (NGA)

Nigeria faces a very high overall risk. Since President Bola Tinubu took office in August 2023, he has been confronted with significant challenges, particularly in the areas of security and the economy, which have heightened the risk of political violence. In early August 2024, the country witnessed a series of demonstrations protesting against the government and the cost-of-living crisis. According to the BBC, these protests resulted in at least 23 deaths, 700 arrests, and 10 protesters charged with treason. Although the "End Bad Governance" protests concluded on August 10, further demonstrations have occurred in October. In addition to these political tensions, Nigeria continues to struggle with extremist and separatist movements, as well as widespread kidnappings. Because of this, the risks of political violence and interference are categorized as very high and high, respectively. Despite some reforms aimed at streamlining permit processes, digitizing document registration, and simplifying tax payments, corruption remains an issue. For instance, corruption among customs and port officials is reflected in Nigeria’s poor ranking on the 2023 Corruption Perceptions Index, where the country is placed as the 35th worst country out of 180. As a result, legal and regulatory risks remain high. Businesses continue to face challenges related to infrastructure and operational inefficiencies. Frequent power outages, port congestion, cumbersome customs procedures, and adverse climate conditions have contributed to a very high risk of supply chain disruptions. On the economic front, according to the International Monetary Fund’s (IMF) Article IV, Nigeria’s will grow 3.3% in 2024 and 3.0% in 2025, driven by increased crude oil production and a strong services sector. However, these figures fall short of President Tinubu’s 6% growth target. Depreciation of the exchange rate, which has negatively affected consumption, is a factor constraining growth. This is a result of the Central Bank of Nigeria unifying the multiple official exchange rates and fostering a market-determined rate to help stabilize the economy. This element – via foreign capital inflows, combined with increased oil production, has helped build reserves, which reached a two-year high in August. Economic and policy uncertainties continue to pose a high exchange transfer risk. The IMF anticipates public debt (as a percentage of GDP) to reach 46.7% in 2024 and 47.0% in 2025, while the fiscal deficit (as a percentage of GDP) is expected to decrease from 4.7% in 2024 to 4.2% in 2025. Nigeria is increasingly relying on the domestic bond market to finance its deficit. The risk of sovereign non-payment is rated medium high, and the government’s inability to provide economic stimulus is considered medium. Despite some improvements in areas such as obtaining construction permits, accessing electricity, registering property, and enforcing contracts, the combination of regulatory uncertainty, policy inconsistency, poor infrastructure, foreign exchange shortages, and inefficiencies in customs continue to make the risk of doing business in Nigeria high.

South Africa (ZAF)

South Africa’s overall risk score remains at medium, with no changes in any of risk levels in this reporting period. First, the risk of political violence remains high due to high income inequality, poverty and corruption. After the ruling African National Congress (ANC) lost its majority in the general and presidential elections on May 29, and ANC and Democratic Alliance (DA) formed a government of national unity (GNU) with the ANC-lead as of June 14, the political interference risk is now at medium-high rating. The country is currently governed by a coalition for the first time in its history and there are still some concerns on the functioning of the GNU while the coalition saw the first real friction over the education bill in September in addition to the clash over the National health insurance which cause legal and regulatory risks to remain at medium level. On the economic front, despite problems such as declining real per capita growth, rising level of public debt and high unemployment remain significant, the macroeconomic outlook continues to improve. August CPI reading was below the mid-point of target band of 3% - 6% and loadshedding has been suspended for 191 days as of October 4. The ease of doing business, which remains at medium-high, is helped by the suspended power cuts and better economic environment. The banking sector vulnerability in South Africa remains at medium-low, showing the relative strength of the financial sector. The economic outlook is positive on the back of improved investor sentiment, sustained electricity generation, and trade surplus coupled with Fed and ECB easing lowering the pressure on the South African Rand (ZAR).