Africa's Central Banks: 2025 Performance & Economic Outlook

The year 2025 presents a diverse and complex economic landscape for Africa, with its central banks navigating a myriad of challenges and opportunities. From managing persistent inflationary pressures to fostering financial innovation and ensuring currency stability, the continent's monetary authorities play a pivotal role in shaping the economic trajectory of their respective nations. This report provides an in-depth analysis of the performance of several key central banks across Africa, highlighting their strategies, successes, and the hurdles that lie ahead.

Navigating Economic Headwinds: A Mixed Bag of Performance

African economies in 2025 demonstrate a varied picture, reflecting differing national contexts, resource dependencies, and policy frameworks. While some countries are experiencing robust growth and declining inflation, others grapple with economic slowdowns, currency depreciation, and structural vulnerabilities. The performance of central bankers is thus evaluated against this backdrop, considering their effectiveness in achieving mandates such as price stability, financial sector oversight, and economic growth support.

Inflationary Pressures and Monetary Policy Responses

Controlling inflation remains a central objective for many African central banks. Several countries have seen their monetary authorities adopt stringent policies to curb rising prices. Notably, Angola’s National Bank of Angola (BNA), under Governor Manuel António Tiago Dias, has maintained one of sub-Saharan Africa’s highest benchmark rates at 19%, though inflation remains elevated at 19.5%. Similarly, Madagascar’s Central Bank (BFM), led by Aivo Andrianarivelo, increased its interest rate to 12% to consolidate declining inflation, expected to average 8.4% for the year.

Zimbabwe's Reserve Bank (RBZ), under John Mushayavanhu, stands out with Africa's highest benchmark rate at 35%, a stance credited for ending hyperinflation, despite annual inflation still at 95.8% in July. Zambia’s Bank of Zambia (BoZ), with Denny H. Kalyalya at the helm, also maintains a tight monetary policy, hiking its rate to 14.5% to steer inflation towards its 6%-8% target. Rwanda’s National Bank (NBR) under Soraya Hakuziyaremye, responded to an inflationary upswing with a 25-basis-point boost to 6.75%, aiming to keep inflation within its target range.

In contrast, other central banks have found room for monetary easing as inflation moderates. The Bank of Algeria (BoA) lowered its policy rate to 2.75% amidst dropping inflation, though concerns about a potential rise persist. The Bank of Central African States (BEAC) cut its main policy rate to 4.5%, citing low inflation projected at 2.8% in 2025. The Central Bank of West African States (BCEAO) reduced its lending rate to 3.25%, confident in stable macroeconomic fundamentals and a forecast inflation of 2.2%.

Egypt’s Central Bank (CBE), led by Hassan Abdalla, began loosening policy by cutting exceptionally high interest rates after the pound float, with inflation falling to 28.3% from 33.9% in 2023. Ghana's Bank of Ghana (BoG), under Johnson Asiama, made significant rate cuts, including a historic 300-basis-point reduction to 25%, driven by declining inflation and cedi appreciation. Kenya’s Central Bank (CBK), with Kamau Thugge at the helm, consistently cut its benchmark rate to 9.5%, as inflation remained within target at 4.1%. Mauritania’s Central Bank (BCM) also lowered its policy rate to 6%, transitioning towards interest rate targeting as inflation remains low. Mozambique’s Bank of Mozambique (BM) initiated a loosening cycle, cutting its MIMO lending rate by a cumulative 700 basis points to 10.25%, with inflation anchored in mid-single digits. The South African Reserve Bank (SARB), under Lesetja Kganyago, cut its repo rate to 7%, citing moderating inflation and a stronger rand. Tanzania’s Bank of Tanzania (BoT) embarked on monetary easing, cutting its benchmark rate to 5.75% as inflation averaged 3.2%.

Currency Dynamics and Foreign Reserves

Currency stability and foreign reserves management are critical aspects of central bank mandates. Algeria’s dinar suffers a significant black-market discount, undermining trust and investment, exacerbated by declining BoA foreign reserves. Rwanda’s franc depreciated by 16% last year and another 2.96% this year, leading to increased informal dollarization, prompting the NBR to ban unauthorized use of foreign currencies. Mozambique, despite record high reserves, grapples with a biting foreign exchange shortage.

Conversely, several nations have maintained or improved currency stability. The Gambian dalasi remained relatively stable, supported by strong remittance inflows. Madagascar's ariary stabilized, boosted by FDI inflows, increasing central bank reserves to $3 billion. Mauritania's puguiya remains largely stable due to BCM’s FX market reforms. Uganda's shilling is lauded as the most stable currency in Africa. Zimbabwe's gold-backed ZiG has remained stable, supported by sustained FX inflows and growing reserves, prompting the RBZ to push for its sole legal tender status by 2030. Nigeria, under Olayemi Cardoso, is seeing FX market stability and skyrocketing reserves, reaching $40.1 billion in July.

Banking Sector Health and Financial Innovation

Central banks are also vital in maintaining a sound financial system and promoting innovation. Angola's banking sector is under fire from the IMF for unsafe practices, with surging government debt exposure and nonperforming loans (NPLs). Ghana's BoG is tackling persistently high NPLs (23.6%) in its banking sector. Morocco’s Bank Al-Maghrib (BAM) notes strong profitability in its banks but acknowledges NPLs have doubled in the last decade. Nigeria’s CBN is pushing banks to recapitalize, with some under special supervisory regimes. South Africa's SARB identified liquidity buffer shortfalls in stress tests on seven banks.

On the innovation front, Algeria’s 2023 Monetary and Banking Law introduced reforms for online, Islamic, and green finance. The BCEAO launched an Interoperable Instant Payment System Platform (PI-SPI) and is finalizing its e-CFA digital currency. Egypt's CBE prioritizes digital transformation and financial inclusion. Ethiopia’s NBE opened its banking sector to foreign institutions for the first time in five decades. Madagascar’s BFM has embarked on a pilot program for its e-ariary. Morocco’s BAM opened the Morocco Fintech Centre, calling for greater cooperation on digital finance and integrating climate risk into policy. Tanzania’s BoT is witnessing deepening financial inclusion through agency and digital banking. Zimbabwe’s RBZ is directing banks to increase access to the ZiG through ATMs and branches to boost usage.

Growth Trajectories and Diversification Efforts

Economic growth projections for 2025 vary significantly across the continent. Egypt is gaining momentum with GDP growth projected above 4%, while Ghana expanded by 5.3% in the first quarter. Gambia is forecast for 6.5% GDP expansion, making it one of the world's fastest-growing economies. Kenya expects 5.2% expansion, driven by strong first-quarter growth. Rwanda projects 7.1% GDP growth, fueled by agriculture, services, construction, and infrastructure investments. Tanzania forecasts further acceleration to about 6%, driven by key sectors. Zimbabwe anticipates 6% growth, up from 1.7% in 2024, thanks to rebounding key sectors.

Conversely, Algeria's economy is expected to slow to 3% due to lower natural gas prices and high public spending, with continued dependence on hydrocarbons. Angola’s growth is expected to plummet to 2.4% following stellar growth in 2024, highly dependent on oil. Botswana faces a 0.4% contraction due to overdependence on the mining sector and diamond exports. Mauritania's economy is slowing to a 4% expansion. South Africa’s economy is in paralysis, projected at less than 1% growth, facing additional uncertainties from US tariffs. Tunisia is forecast to grow only 1.9%, trapped in a multifaceted crisis.

Governance and Autonomy: A Critical Lens

The independence and credibility of central banks are paramount. In Mauritius, the Bank of Mauritius (BoM) has faced scrutiny over credibility due to political interference and leadership changes, casting doubt on its ability to discharge its mandate. Tunisia’s Banque Centrale de Tunisie (BCT) confronts a structural challenge: the erosion of central bank independence, with Parliament authorizing it to lend interest-free to the treasury, a move criticized as a forced bailout. Ethiopia saw the abrupt resignation of Governor Mamo Mihretu, replaced by Eyob Tekalign, raising questions about continuity. Uganda’s BoU, under Michael Atingi-Ego, has largely maintained its smooth operations, including shielding the bank from political influence.

Conclusion

Africa’s central banks in 2025 present a narrative of resilience, adaptation, and ongoing challenges. While many are making strides in controlling inflation, stabilizing currencies, and fostering financial sector growth and innovation, external shocks, commodity dependence, and internal governance issues continue to test their resolve. The varying grades assigned reflect the complex interplay of these factors, underscoring the dynamic role of monetary policy in navigating Africa’s diverse economic future.