Ghana's currency rallies 40% as inflation dips to 9.4%

Author

Isaac Osei-Kissi
November 07, 2025

 

Weekly African Market Insights

Week of November 7, 2025

Executive Summary

Africa's economic outlook remains resilient amid global headwinds, with projected GDP growth of 3.9% in 2025 and 4% in 2026, though foreign direct investment has experienced a significant contraction. While 21 African countries are positioned to achieve growth exceeding 5%, the continent faces mounting external pressures from global trade tensions and tighter financial conditions. Key bright spots include Ghana's currency stabilization, Nigeria's accelerating growth, and emerging opportunities in renewable energy and digital economy sectors, offset by a 42% decline in FDI inflows during the first half of 2025.

Economic Indicators

Regional Growth Trajectory

Africa's economy is projected to grow 3.9% in 2025, increasing to 4% in 2026, demonstrating continued resilience despite external shocks.[3] However, sub-Saharan Africa specifically faces a revised downward projection of 3.8% for 2025, reflecting convergence of external and internal pressures including global trade tensions, tighter international financial conditions, and reduced commodity revenues.[5] Twenty-one African countries are positioned to exceed 5% growth in 2025, with Ethiopia, Niger, Rwanda, and Senegal potentially reaching 7%—the critical threshold for poverty reduction and inclusive growth.[3]

Major Economy Performance

Nigeria's real GDP expanded 4.23% year-on-year in Q2 2025, marking its fastest growth since 2021 following a rebasing exercise.[1] The country is expected to average 3.73% year-on-year growth from 2025 to 2027 as government reforms yield results and macroeconomic conditions improve.[1] Ghana's economy is projected to grow 5.5% in 2025, 5.9% in 2026, and 6.1% in 2027, though cocoa production fluctuations, the swollen shoot virus, and commodity price volatility present downside risks.[1] South Africa's economic momentum weakened significantly, with real GDP growing only 0.1% in Q1 2025, indicating stalled economic activity.[12]

Inflation and Monetary Policy

West Africa is experiencing disinflation, with inflation projected to average 21.4% in 2025, declining to 14.9% in 2026 and 15.8% in 2027.[1] Ghana achieved a historic single-digit inflation reading of 9.4% in September 2025 after approximately four years of double-digit levels, driven by a strong cedi, falling nonfood prices, and reduced supply-side pressures.[1] However, full-year inflation is projected to average 15.6%, exceeding the Bank of Ghana's 10% upper target before moderating to 9.7% in 2026.[1] The Bank of Ghana has implemented cumulative 650-basis-point rate cuts as of September 2025, with the monetary policy rate currently at 21.5% per annum and expected to decline to 17% by end-2026.[1]

Currency Stability and Foreign Exchange

Ghana's cedi appreciated over 40% in the first nine months of 2025 to average 13 per US dollar, reaching approximately 10.3 in June, driven by higher gold revenues and increased international reserves.[1] The currency rebound reflects frequent central bank interventions, successful debt restructuring, and initiatives like the Ghana Gold Board.[1] The cedi is projected to average 12.33 per US dollar in 2025, 12.5 in 2026, and 12.61 in 2027, though potential monetary policy easing could reverse these gains if global gold demand diminishes.[1]

Significant FDI Contraction

Foreign direct investment to Africa experienced its sharpest decline in years during Q1 2025, with the continent's global share of opened greenfield FDI projects falling from 3.8% in 2024 to 3% in 2025.[2] FDI inflows plummeted 42% to $28 billion during the first six months of 2025, compared to $48 billion during the same period in 2024, making Africa particularly vulnerable to the global investment slowdown.[6][8] Global capital expenditure invested in open greenfield FDI projects has declined steadily since 2021, from $17 billion to just $6 billion in 2025.[2]

Sectoral Diversification

Foreign investment is increasingly broadening beyond traditional extractive industries into high-potential sectors including renewable energy, technology, and manufacturing.[4] Renewable energy and green infrastructure projects are attracting significant investment, with multi-billion-dollar green hydrogen ventures announced in Mauritania and large green ammonia and hydrogen facilities established in Egypt's Suez Economic Zone.[4] Africa's digital economy has seen the highest number of new investment projects in recent years, with global tech companies and venture capitalists investing in fintech, mobile telecommunications, e-commerce, and business process outsourcing.[4]

Regional Investment Disparities

In 2023, Africa accounted for approximately 4% of global FDI inflows, with West Africa receiving about 1% of the global total.[10] The continent's ability to attract FDI later in 2025 will depend on retained global investor confidence rather than nation-specific factors, according to investment analysts.[2] While six of the ten largest greenfield investments announced in the developing world in 2023 were in Africa—matching Asia's performance—this momentum has not translated to 2025.[4]

Regional Trade and Integration

African Continental Free Trade Area Progress

Nearly 50 nations ratified the African Continental Free Trade Area (AfCFTA) agreement in January 2025, inching the continent closer to establishing a single market for its 54 countries.[2] In 2023, the AfCFTA adopted a Protocol on Investment designed to promote, facilitate, and protect investments across member states, improving the business environment by reducing policy uncertainty and safeguarding investor rights.[4] This framework enables foreign companies to scale operations across multiple African countries rather than facing fragmented markets, providing economies of scale and streamlined cross-border operations.[4]

Bilateral Economic Partnerships

The United Arab Emirates and Kenya signed a Comprehensive Economic Partnership Agreement in 2025, aiming to strengthen economic ties across various sectors.[2] These bilateral frameworks complement broader continental integration efforts and demonstrate renewed focus on intra-African and international economic cooperation.

Investment Opportunity Spotlight

Renewable Energy and Green Hydrogen

Africa is emerging as a critical frontier for renewable energy investment, with particular opportunities in green hydrogen production. Projects in Mauritania valued at several times the country's GDP and facilities in Egypt's Suez Economic Zone represent transformational investments aligned with global climate goals and export market potential. Risk mitigation centers on infrastructure development, financing mechanisms, and political stability assurance.

Digital Economy and Technology Services

Africa's technology sector continues attracting venture capital and multinational investment, with fintech, mobile telecommunications, and business process outsourcing generating consistently high project numbers. Growth is supported by expanding internet penetration, young demographic populations, and favorable labor cost dynamics, though infrastructure quality and regulatory clarity remain ongoing challenges.

Forward-Looking Perspective

Near-Term Market Dynamics

Ghana is expected to receive a $385 million IMF disbursement following five successful staff-level reviews, providing fiscal breathing room and reinforcing investor confidence.[1] The macroeconomic stabilization evident in Nigeria and Ghana through 2024-2025 is projected to extend through 2027, creating relatively stable investment environments compared to 2024. However, persistent global trade tensions, particularly regarding tariffs on utilities and agricultural products, could disrupt inflation projections and currency stability.

Risk Factors to Monitor

Global trade uncertainty and potential government revenue shortfalls remain primary external risks, while commodity price volatility continues threatening growth forecasts for resource-dependent economies.[1] Development financing pressures, evidenced by declining Official Development Assistance, constrain fiscal space for infrastructure and social spending across the continent.[5] Political stability considerations and infrastructure limitations in certain regions continue competing with Asia and Latin America for investment capital.

Sources & References

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Disclaimer: This report is for informational purposes only. Always conduct independent research and consult financial advisors before making investment decisions.