Inflation, debt, currency woes threaten growth in Ghana, Nigeria – Deloitte warns

Professional services firm Deloitte has cautioned the governments of Ghana and Nigeria about the risks posed by high inflation, mounting debt, currency depreciation, and a tight monetary policy environment, describing them as significant obstacles to economic growth in 2025.

It is, therefore, urging both nations to prioritize addressing these challenges to achieve sustainable long-term growth.

In its Global Economic Outlook – January 2025, Deloitte noted that economic expansion in West Africa has been constrained by the rising cost of goods and services, which has led to higher interest rates as monetary authorities work to curb inflation.

“Nigeria and Ghana have also been grappling with currency volatility, which has severely affected their capacity to import essential raw materials and equipment needed to drive production. In the first half of 2024, the Nigerian naira depreciated by over 40%, while the Ghanaian cedi lost more than 20% of its value against the US dollar.”

Despite these challenges, Deloitte maintained a positive outlook for Ghana’s economy in the short to medium term.

“Compared to Nigeria, Ghana appears to have stronger growth prospects. Its economy expanded by 4.7% year-on-year in the first quarter of 2024, largely fueled by a robust 6.8% year-on-year growth in the industrial sector.”

The report further highlighted that the agriculture and services sectors grew at a more moderate pace of 4.1% and 3.3% year-on-year, respectively, in 2024.

Deloitte also noted that Ghana is gradually recovering from its debt-induced crisis, aided by the government’s ongoing restructuring of its US$30 billion debt. Additionally, monetary policy interventions by the Bank of Ghana have contributed to easing inflationary pressures.

“The effects of ongoing pro-market government reforms and debt-restructuring and sustainability initiatives (especially in Ghana) are expected to have started yielding some results, boosting productivity and overall economic output. A more stable domestic currency will also contribute to the projected recovery in these countries.

“Ghana is projected to record a faster pace of growth at 5.1% and 5.3% in 2025 and 2026, respectively. Overall, macroeconomic stability is expected to be gradually restored over the forecast period of 2025 to 2026 in West Africa as these challenges slowly moderate.

“Rising debt is a growing concern in West Africa and Africa as a whole. Ghana received its fourth disbursement tranche of US$360 million in the last quarter of 2024, bringing total disbursements received from the International Monetary Fund under the Extended Credit Facility to US$1.92 billion.

“We expect the Ghanaian government to continue its fiscal consolidation between 2025 and 2026. Government will support this with revenue generation reforms that could include raising existing taxes or tariffs, and the introduction of new taxes such as a green tax. These measures are forecast to lead to a narrowing of the fiscal deficit as a percentage of GDP from 4.4% estimated in 2024 to 3.9% in 2025 and 3.6% in 2026.”