Export Diversification: Africa in Focus
Bottom Line: The latest update of our Country Insights model reveals that African countries are greatly exposed to global shocks due to high trade vulnerability, this according to our export diversification indicator.
Source: Continuum Economics
Consistent with a United Nations (UN) report on export diversification in Africa (here), our Country Insights model (here) suggests the need of countries in this continent to diversify their economies. Targeted trade policies aiming to achieve diversification will likely result in technological progress, job creation, and economic stability. Likewise, as highlighted by the UN, it would allow these countries to mitigate the shocks from external crises such as the COVID-19 and the Russia-Ukraine war.
Nigeria, the largest economy in Africa based on current GDP, ranks at the bottom of the ranking. According to data from the International Trade Centre (ITC), only the categories of mineral fuels/oils and fertilisers accounted for more than 90% of the country’s exports in 2022. While in the short term, scenarios such as the 2014 commodity price crash can impact Nigeria’s stability, long term structural changes in global dynamics, like the transition towards renewable resources, represent relevant threats to the Sub-Saharan nation.
A relevant difference is appreciated when the second largest economy in the continent is analysed, i.e., Egypt. Data from the ITC shows that the country’s main exports during 2022 were mineral fuels/oils, plastics, and electrical machinery; however, these three categories account for less than 50% of the country’s exports. Despite a relatively good performance in this indicator, the country has room to diversify its economy by promoting its services sector, particularly the information and technology sector.
Our latest insights on a comprehensive group of African countries can be found (here), with an update expected by end of October.