Is Africa’s cost-of-living crisis getting better or worse?
The cost of living crisis in Africa is a pressing concern that continues to affect the continent’s economic landscape.
The escalating prices of essential commodities, such as food, fuel, and other basic services, pose significant hurdles for many Africans as they strive to meet their everyday needs.
Nigeria’s Inflation Woes
In August 2023, Nigeria, Africa’s largest economy, saw its annual inflation rate spike to a staggering 25.8%, marking an 18-year high. This surge in inflation was triggered by a combination of factors, including the removal of petrol subsidies and the discontinuation of exchange controls.
These rising costs are seriously impacting Nigerians, with many struggling to afford fundamental necessities.
South Africa’s Fuel Price Hike
South Africa is also grappling with its own set of cost-of-living challenges. Unaudited fuel data suggests significant increases in petrol and diesel prices, primarily driven by surging international oil prices. These prices have surged since August due to reduced output by major oil-producing nations.
Kenya’s Fuel Price Record High
In Kenya, the cost of fuel reached an all-time high on September 15 following a revision of pump prices by the Energy and Petroleum Regulatory Authority.
This added to the economic challenges faced by millions in the country. The retail price of a litre of petrol soared to over 200 Kenyan shillings ($1.36), exacerbating the existing cost-of-living crisis characterised by rising prices for staple goods, new taxes, and a weakening shilling.
The cost-of-living crisis is far from over
The World Bank recently reported a slowdown in economic growth in Sub-Saharan Africa (SSA) from 4.1% in 2021 to 3.6% in 2022, with projections pointing to a further decline to 3.1% in 2023.
This deceleration is attributed to several factors, including the global economy’s persistent sluggishness, high but declining inflation rates, and challenging global and domestic financial conditions amid rising debt levels.
According to the World Bank, growth is estimated to pick up to 3.7% and 3.9% in 2024 and 2025, respectively. However, growth conditions remain insufficient to reduce extreme poverty and boost shared prosperity in the medium to long term.
Economic activity in South Africa is set to weaken further in 2023 (0.5%) as the energy crisis deepens, while the growth recovery in Nigeria for 2023 (2.8%) is still fragile as oil production remains subdued.
The World Bank urged African countries to focus on harnessing the potential of natural resources to provide an opportunity to improve fiscal and debt sustainability.
It added that tapping into energy resources – natural resources (oil, gas, and minerals) offers a huge economic opportunity for SSA economies and can improve energy access.
