Nigeria, Ghana, Benin, Burkina Faso, and 11 other West African countries Gross Domestic Product (GDP) is expected to rise marginally to 3.9 percent in 2023 from the 3.8 percent recorded in 2022, the African Development Bank Group (AfDB) has said.
In its 2023 West Africa Economic Outlook report titled “Mobilising Private Sector Financing for Climate and Green Growth in West Africa” the group admitted that the growth of the West African economic bloc was slower compared to the COVID-19 period of 2020 and 2021.
The report which was launched on Thursday attributed this “decelerating growth” to “successive shocks from a resurgence of COVID-19 in China, a major trade partner for the region’s countries.”
It also pointed out the negative impact the Russian invasion of Ukraine has had on driving inflation on the cost of food, fuel, and fertiliser. Making those commodities more expensive than they were a year ago.
The continental development bank also admitted that the tightened monetary policy of most advanced economies also played an important role in limiting growth, even as it fell below the 4.4 percent attained in 2021.
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However, it was admitted that the positive growth outlook could lead to GDP rising to 4.2 percent in 2024, a situation that should come from increased private sector funding in the green economy and sustainable energy.
The report also threw more emphasis on the need to transition to a green economy, especially as the negative impact of global warming worsens climate conditions. With global heat waves hitting record numbers—the worst the world has ever witnessed since records were taken—the group pleaded for countries in the bloc to mobilise more resources for this sector.
It was admitted that this new challenge presents an opening for businesses and governments to embrace sustainable and green growth.
According to the report, “West Africa has enormous potential to achieve green growth, with green industrialization being the most obvious pathway. The rationale for green growth across the region is quite comprehensive: climate change impacts and risks, natural capital depletion, poverty, and food insecurity, as well as limited employment creation and many capital-intensive enclaves.”
Speaking during the launch, Professor Kevin C. Urama, African Development Bank Chief Economist and Vice President for Economic Governance and Knowledge Management, said that multiple challenges had led to rising interest rates and were compounding debt service payments to African countries. He explained that these included climate change, inflation driven by higher prices of energy, commodities, and disruption of supply chains, as well as the tightening of monetary policy in the United States and Europe.
Urama added that greater effort will be needed in Africa to mobilise domestic resources and private sector financing to help countries achieve climate and green growth transitions.
He said, “Africa is being shortchanged [in] climate financing. The continent will need between $235 billion and $250 billion annually through 2030 to meet investments under its nationally determined contributions. Yet, Africa received only about $29.5 billion in climate financing between 2019 and 2020.”
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Private sector financing to support climate adaptation and mitigation in Africa is estimated at just $4.2 billion from 2019–2020, the lowest of any region in the world.
Africa’s private-sector climate financing gap is estimated to reach $213.4 billion annually between 2020 and 2030.
Quoting from the report, Urama said: “Africa can accelerate its green development transitions by optimising its natural capital, estimated at about $6.2 trillion in 2018.”
He noted that the continent, however, was not getting the best out of its natural resources because of poor valuation, degradation, illicit capital flows, and losses from royalties and taxes.
Also speaking at the report launch, African Development Bank lead economist Guy Blaise Nkamleu said that four of the region’s fifteen countries—Guinea-Bissau, Mali, Liberia, and Niger—were ranked among the ten most vulnerable countries to climate change and environmental hazards worldwide.
“To boost private sector financing for climate change and green growth, innovative instruments and mechanisms need to be deployed by West African governments to attract private sector financing,” Nkamleu said.