For many investors, the past few years on the continent have been difficult, according to David Cowan, Africa Economist at Citi. “Currencies have collapsed around you. You’ve had a lot of issue on return,” he said during his session "INVESTING Solo: Where is Africa going? Thinking about Economic and Currency Outlook" at the AFSIC 2025 conference.

Cowan described how the “Africa Rising” story had gained momentum in the 2000s, attracting a wave of private capital and Chinese investment. But as governments expanded spending, fiscal deficits widened—a trend, he said, was always at the root of Africa’s economic challenges. “The fiscal deficit is always the root of an African economic problem,” Cowan said. “It was the root in the ’80s and the late ’70s.”

That trend held until COVID-19 in 2020 pushed fiscal spending even higher. The global inflation shock following Russia’s invasion of Ukraine in 2022 then forced interest rates up, exposing vulnerabilities. Zambia defaulted in 2020, followed by Ghana in 2022, and attention turned to other high-risk countries. “The market started to ask questions. We’ve given Africa a lot of money; these countries have defaulted—who will default next?” Cowan said.

While the defaults raised alarm in financial markets, Cowan noted that for many people on the ground, life went on. “If you lived in Lusaka, if you lived in Accra after the default, nothing really made any difference. You woke up. The sun was still shining. You went to work in the morning.”

The sharper impact, he argued, came through currency devaluations. “When a country defaults, its currencies tend to get crushed.” That was the case in Zambia, Ghana, Sierra Leone, and Kenya. But some of the continent’s biggest economies, including Egypt and Nigeria, initially resisted exchange rate adjustments. “When you don’t let your currency move, what you have is this huge backlog of FX building up inside the country that you can’t get out.”

By late 2023, Cowan estimated that $10 billion was trapped in both Nigeria and Egypt due to rigid currency regimes. “That was the problem.”

In early 2024, the situation shifted. Markets began to anticipate interest rate cuts by the U.S. Federal Reserve, unlocking new capital flows. “Côte d’Ivoire came back to the market. Benin came back to the market.” China also resumed lending, pledging $50 billion over three years during the September 2024 Forum on China–Africa Cooperation.

More significantly, Nigeria and Egypt finally allowed their currencies to float. “The central banks of Egypt and Nigeria gave up the ghost and devalued their currencies,” Cowan said. Egypt’s pound went from 17 to around 51. The naira moved from 464 to 1,500. “Even by my standards, these are big moves.”

Cowan compared the scale of the naira’s devaluation to the early 2000s, when it shifted from 21 to 100. “You’ve only seen these sorts of moves most of us once in our life. They are incredibly brutal. They push up inflation. Psychologically, they are extraordinarily disruptive for the people on the ground.”

Despite the disruption, Cowan said the devaluations are helping economies adjust. “They do ultimately drive the change.” He pointed to signs of recovery: “The Nigerian economy is picking up. The Egyptian economy is picking up.”

In Ghana and Zambia—two countries that recently defaulted—he said the rebound has been particularly strong. “Ghana is growing at 6%, has a fiscal deficit under 3% of GDP, is running a large current account surplus, and depending where the cedi ends up at the end of the year, debt will probably be under 50% of GDP. That is a huge turnaround.”

Cowan also highlighted positive terms of trade across much of the continent. “In Ghana’s case, gold price high, cocoa price high. That helps drive the current account surplus.” Oil prices in the $60–$65 range, he said, are “relatively fairly balanced for Africa,” providing support to oil exporters without heavily penalizing importers.

Structural changes are also underway. “They’re recapitalizing the banks,” he said of Nigeria. “The multinationals have sold their onshore operations completely. They’re only operating offshore now.” How the rise of indigenous Nigerian oil companies plays out, he said, will be critical.

In the banking sector, Cowan described a shifting landscape as foreign banks retreat. “Citi will be the last foreign bank standing in Africa. The European banks are gone.” In their place, “the Moroccan banks come down, Nigerian banks go across, the Kenyan banks go across. And the South African banks coming up. They will be fighting for the future.”

According to Cowan, this year could mark a milestone. “Standard Bank of South Africa will earn more in the rest of Africa than in South Africa for the first time.”

However, Cowan cautioned that the story is not without risks. “Senegal could default,” he said. Currency adjustments are still needed in Mozambique, Angola, and Malawi. “The Malawian kwacha is going to have to collapse at some point.”

Looking ahead, Cowan warned that currency management will be a key test: “We’ve still got to get the currency story right.” He said that if, by the end of 2026, major currencies are still locked at their current post-devaluation levels—naira at 1,500, Egyptian pound at 51, Kenyan shilling at 130, kwacha at 24, cedi at 13.5—then that could be a sign of new vulnerabilities. “It can start to be the seeds of another problem coming forward.”

Still, Cowan’s overall outlook was constructive. “We’ve had this big adjustment, this big reality call. And now it’s running into a situation where actually, across Africa, we have quite positive terms of trade impacts.”

“Enjoy the next six months,” he concluded, “but let’s worry about the currencies when we get to next year.”