Harsh reforms undertaken by Nigeria’s President Bola Tinubu as well as the ANC’s historic defeat in South Africa’s 2024 elections and formation of a coalition government have put the two powerhouse countries on a promising trajectory.
Squint and it pops into view: Air Africa, flying high, propelled by its two major engines, Nigeria and South Africa. For over a decade, the continent’s growth prospects have been shackled by giants with feet of clay. Will the arrival of reform-minded governments in Pretoria and Abuja flip the script?
Nigeria under former president Muhammadu Buhari suffered from a collapse in the price of oil. It was also anti-business and penetrated by the worst of kleptocrats. Subsidies on fuel and the naira, far from helping the poor, were seized by the rich.
South Africa during that period endured ex-president Jacob Zuma, who dismantled key elements of the state – the tax service, prosecuting authority, key parastatals in logistics and power – and installed his cronies, a process known as state capture. Domestic capital fled; international investors baulked.
Cyril Ramaphosa‘s first term improved things, but South Africans found it hard to see much difference, leading to the historic displacement of the African National Congress (ANC) in elections in 2024 and the arrival of a coalition government.
Have things changed? Take one key metric, the provision of regular electricity, and signs are genuinely promising. Seven months without ‘load shedding’ has been celebrated by all in the country.
The bull case: the Government of National Unity allows reformers around Ramaphosa to sideline the corrupt elements of the ANC. The bear case: scandal-hit Thembi Simelane, removed from the justice minister portfolio but not ejected from the government.
Tough love
The arrival of Bola Tinubu in 2023 in Nigeria and his inaugural address, which ended the fuel and naira subsidies at a stroke, was met with enthusiasm. While the intervening year saw biting inflation and a failure to provide for the most vulnerable, many see green shoots.
Having these two countries on a promising flight path makes a welcome change
Inflows in the Nigerian economy in the first half of 2024 neared $6bn – around 177% more than the year before. In contrast to investors fleeing the country, 2024 has seen billion-dollar commitments from Coca-Cola and TotalEnergies.
Here, too, there are bear and bull cases. The optimistic scenario sees tweaks to local content and tax laws ignite a genuine investment boom in the Nigerian gas-to-power sector, with large industrial offtake projects such as the $1.6bn methanol project announced by Flour Mills of Nigeria for fertiliser production.
The new deep-sea port in Lekki could be a site of industrial renaissance, where improved logistics and a newly cheap currency spawned factories that serve the region. But if Nigeria slips into pre-election mode, the economy may take a back seat.
Stay and squint awhile. Given the interlinkages of economies – and that Nigeria represents two-thirds of the West African economy – having these two countries on a promising flight path makes a welcome change.
The Africa Report