Economic situation worsens as Nigeria drops by six points on SSA risk index

Country downgraded from stable to vulnerable status

This is indeed not the best of times for Nigeria’s economic managers as international rating agencies have continued to raise concerns about the state of the country’s economy.

The latest vote of no confidence came from SBM Intelligence Africa Country Instability Risk Index, which classified the country as vulnerable to instability in its 2024 report.

This position is a downgrade from the stable status, it was classed in 2023, a sign that the economic reforms of the current administration are strangulating rather than building the economy.

Since May 29 last year, Nigeria has struggled with high inflation and unstable currency value, with the naira losing over 70 per cent of its value to the dollar.

The high energy cost arising from the removal of fuel subsidies and the fluctuation of the exchange rate have escalated the cost of doing business and made the cost of living extremely high and pushed more citizens into poverty.

Nigeria dropped six points on the risk index this year, scoring 45 compared with 39 in 2023. According to SBM Intelligence, a higher score in the risk index means a higher level of political risk to business.

The implication is that Nigeria stands the risk of financial market turmoil, delayed consumption and investment decisions by both businesses and the citizens.

The report highlights Nigeria’s deteriorating economic environment, worsened by factors such as rising food inflation, insecurity and rising poverty level as the drivers of instability in the country.

“Nigeria’s economy continues to worsen, with rising food inflation, persistent insecurity across all geopolitical zones, and many people falling into extreme poverty.

“It is more polarised now than ever after the 2023 election and the unpopular reforms of the new government, such as the removal of petrol subsidies, which has worsened living conditions and led to the closure of businesses,” the report said.

Other African nations sharing this risk status include Ethiopia, Comoros, Côte d’Ivoire, Benin, and Togo, reflecting broader economic and governance concerns across the continent.

Analysis of the report shows that Sub-Saharan Africa recorded an average of 45.4 per cent in 2024, an improvement from 47.7 per cent in the previous year.
Out of 48 countries, 31 reported improved performance, while the rest deteriorated. Angola, Burundi, Chad, Togo, and Madagascar were the biggest gainers.
A cutback on governance costs drove Angola’s performance, while Madagascar’s GDP growth improved to 4.4 per cent in 2023 from 4.3 per cent in 2022.

Botswana, Seychelles, Nigeria, Namibia and Zimbabwe were the biggest losers. Botswana experienced a GDP decline of nearly two per cent in the first quarter of 2024, and Zimbabwe experienced economic challenges such as debt and currency crises.

On a regional count, Central African countries had the most representation, in the top ten, with about 40 per cent of the lot having countries such as Angola, Central African Republic, Chad, and Gabon.

Following closely is West Africa at 30 per cent with Guinea, Sierra Leone and Togo. The regions with the lowest representations are East Africa, with 20 per cent represented by Burundi and Madagascar, and Southern Africa, at 10 per cent, with Eswatini as its sole representative.

“The worst-performing entities are shared by Eastern and Southern Africa, at 40 per cent each–represented by countries such as Seychelles, Kenya, Mauritius and Comoros on the East side and Botswana, Namibia, Zimbabwe and Zambia on the South,” SBM Intelligence stated.