Finance in Africa 2024

2024 could be a turning point for the economic and financial pressures facing African countries, although some challenges persist. Financial market conditions improved in 2024, with sovereign bond yields falling and some African countries regaining access to international bond markets. However, yields remain high for some countries, raising re-financing risks. Moreover, several African countries are not yet experiencing the decline in inflation seen across the world (the 2024 rate might even be marginally higher than the 17% observed in 2023). This situation could delay or slow a loosening in monetary policy on the continent, which would affect private sector financing. Nonetheless, economic growth is expected to increase in Africa in 2024 and 2025, with growth in the five-year period between 2024 and 2028 potentially being the fastest on record since 2008-2012, as the drag on economic activity caused by recent global shocks begins to fade.

The EIB financial conditions index for Africa – expanded to ten countries in this edition of the report (South Africa, Egypt, Nigeria, Kenya, Morocco, Côte d’Ivoire, Ghana, Tunisia, Senegal and Zambia) – points to a loosening in financial conditions following a severe tightening from mid-2021 to mid-2023. The period after the start of the war in Ukraine represented the most severe peak-to-trough tightening episode since 2009, and the financial tightening appeared to be more severe for countries with weaker sovereign creditworthiness. The tightening started to wane around mid-2023, particularly for the smaller countries newly introduced to the index, and conditions have been loosening again since then.

Despite improving market conditions, lack of access to finance is a key structural constraint to development. Private sector credit declined from 56% of gross domestic product (GDP) in 2007 to 36% of GDP in 2022 in sub-Saharan Africa. This has been associated with relatively weak growth in the private capital stock, which is at a lower level in Africa than in other regions. This may have contributed to weaker private sector development and less industrialisation.

Sub-Saharan African banks have seen their profits grow in the high interest rate environment although the spread between deposit rates and private sector lending rates has narrowed in many countries. However, banks have increased their holdings of government bonds, and yields on these government bonds have increased sharply, driving profits higher. As sovereign bond yields begin to fall, this is likely to weigh on bank profitability.

The fintech sector in Africa continues to grow, with the number of active fintech companies reaching 1 263 in 2024, up from 1 049 in 2022 and 450 in 2020. Nigeria and South Africa together host nearly half of all fintech firms. Payments remain the dominant fintech product in Africa, offered by 33% of fintech firms, followed by lending services, offered by 19% of firms. Gains in financial inclusion in Africa are driven by access to digital financial services, while growth in access to traditional banking services is significantly slower.

Africa is acutely exposed to the physical risks of climate change, but many banks see limited impact on asset quality, often because banks are reluctant to lend to agriculture, the sector most exposed to climate risk. In the survey, banks were also asked to relate their climate perceptions/engagement, ranging from cautious (do not acknowledge climate as significant risk) to leaders (climate is central to policies and operations). Engaged banks are more likely to offer green products to customers and less likely to identify internal constraints to green lending.

The EIB has been investing in Africa since 1963, financing a range of projects that support sustainable economic development. In the current period of geopolitical fragmentation and uncertainty, Europe’s partnership with Africa is vital and must be strengthened. In 2023, EIB Global opened regional hubs in Cairo, Egypt, and Abidjan, Côte d’Ivoire, allowing for closer ties with private and public partners across the continent. The Bank’s financing beyond the European Union reached €8.4 billion in 2023, 37% of which went to Africa, including €2.5 billion in sub-Saharan African and €0.7 billion in North Africa.