2020 was a mixed year for democracy in West Africa. Côte d’Ivoire’s President Alassane Ouattara won a third term in November, but the contest was boycotted by the opposition, who claimed that his bid for re-election breached the constitutional two-term limit. Guinea’s Alpha Conde also won a third term after scrapping term limits.
But in proudly democratic Ghana, where incumbent President Nana Akufo-Addo claimed a second term, the government has reacted well to the crisis, says Yvonne Mhango, economist for Sub-Saharan Africa at Renaissance Capital. With elections over, political risk has subsided and the region can focus on healing the economic scars left by the virus, she says.
“In Ghana we have an administration in office that can focus on getting out of the crisis, which is a good thing. We think Côte d’Ivoire could bounce back sooner, simply because it had a much more solid economy and growing prices had been growing quite strongly, while the pandemic was relatively contained. We think Côte d’Ivoire will do well on the macro side.”
Investors will be far more bearish on Nigeria where only a limited recovery is expected this year. Africa’s biggest economy and oil producer, which already had one of the lowest tax-to-GDP ratios in the world, saw its fiscus battered by an oil price hovering around $50 a barrel.
“Pre-crisis government revenue was around 60% of GDP. Now its halved,” says Mhango. “Pre-Covid it started to grow by more than 2%, but the country needs to grow at least 3% for its per capita income to increase in real terms.”
That seems unlikely, with the IMF projecting a -4.3% contraction in 2020 and 1.7% growth in 2021. An improvement in the oil price as the global economy recovers could brighten that dismal outlook.
“Inflation will remain high, monetary policy will tighten and the currency should remain relatively strong, partly because we are going to see some improvements in oil revenues,” predicts Mhango.
For investors, Nigeria’s prospects cast a pall over the entire continent’s growth story.
“When you need somewhere like Nigeria showing how Africa could be doing well, and it’s not, it hangs a dark cloud over prospects for the rest of the continent,” says Charlie Robertson, Africa economist at Renaissance Capital.