- Nigeria tops the list of the top 10 African countries with the highest savings in USD, followed by South Africa and Algeria.
- The rankings are based on data from the World Bank, providing insight into the financial habits and stability of each country.
- Factors such as diversified economies, natural resources, and strategic locations have contributed to the impressive savings of these African nations.
Measuring a country’s financial strength involves assessing various economic indicators, one of which is its savings. Gross savings – including savings by households, businesses, and the government – are a reflection of a country’s economic stability and growth potential.
According to data from the World Bank, the 28 African countries with available information had an average savings of 17.69 billion U.S. dollars in 2021. However, some countries surpassed this average by a significant margin, with Nigeria leading the way with 149.32 billion USD in savings.
Here are the top 10 African countries with the highest savings in USD in 2021, according to data from the World Bank.
Nigeria – 149.32 billion USD
Nigeria leads the pack with a staggering 149.32 billion U.S. dollars in savings. This is largely due to its vast oil reserves, which have made it the largest economy in Africa.
South Africa – 67.81 billion USD
As one of the most developed economies in Africa, it’s no surprise that South Africa comes in second place. The country’s diversified economy and strong financial sector have helped it amass significant savings.
Algeria – 59.56 billion USD
Algeria’s oil and gas sector is the main driver of its economy, and this is reflected in its high savings. The country has also made efforts to diversify its economy in recent years, which bodes well for its financial future.
Morocco – 41.17 billion USD
Morocco has seen impressive economic growth in recent years, with its tourism and manufacturing sectors leading the way. This has helped the country build up a sizable amount of savings.
Egypt – 31.09 billion USD
Egypt’s economy is one of the largest in Africa, and its strategic location has made it a key player in global trade. Its savings are a testament to its economic strength.
Ethiopia – 27.93 billion USD
Ethiopia has one of the fastest-growing economies in Africa, with its agriculture and manufacturing sectors driving growth. The country has also made significant investments in infrastructure, which should pay off in the long run.
Angola – 27.1 billion USD
Angola’s oil reserves have been a major source of wealth for the country, but it has also made strides in diversifying its economy. This has helped Angola build up significant savings.
Kenya – 18.11 billion USD
Kenya’s economy is driven by services such as tourism, telecommunications, and financial services. The country has also made significant investments in infrastructure, which should help it continue to grow.
Ghana – 16.87 billion USD
Ghana has seen impressive economic growth in recent years, with its oil and gas sector playing a major role. The country has also made efforts to diversify its economy, which should help it build up even more savings in the future.
DR Congo – 13.27 billion USD
Despite its challenges, the Democratic Republic of Congo has managed to amass a significant amount of savings. Its natural resources, such as copper and cobalt, have contributed to its economy.
Economic-conscious people save in dollars to shield against inflation and the devaluation of their local currencies. USD is the unit of value for both traditional and decentralized finance, and it’s considered the most powerful currency in the world.
First off, we need to understand what is money?
Have you ever wondered why this little piece of paper-like thingy can give you most of things you desire in your life?
It’s a relatively easy answer. Because exchanging goods to goods (barter economy) is rather inefficient and impractical in the modern days. So as all countries have a government, citizens have no choice but to trust their government to put faith in the currency the government issues.
So the key word to the currency is Trust.
So here comes the question, if two countries NOT trading with each other at a perfect balance (practically impossible). What currency do they use? The country trading at a deficit can’t obtain the other one’s currency as it is trading at a deficit. The country trading with a surplus doesn’t need the other’s currency as it has no use to it.
That’s why Silver was used as a medium in the trade between the UK and China.
Why? Because the world understands that silver/gold are precious stones and putting faith in them.
I am sure a lot of you have heard of it. I wouldn’t repeat here. But for the sake of my points, a brief summary:
- The year was 1944.
- The conference reached to an agreement that to use USD (anchored by gold) as the world trading currency. (On paper, it says both USD and Gold can be used as currency. But we all know people don’t usually bring a brick of gold for trading.)
- Countries were responsible to maintain their exchange rate which was fixated on the gold.
- As the US held 2/3 of the gold reserve of the world. Any other country who held USD can demand to swap for gold at any time.
- The Soviets refused to rectify the agreement, as they claimed “it is a branch of Wall Street”.
The end of Bretton Woods system
Year 1971, the United States terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency. (type of money that is not backed by any commodity such as gold or silver).
To be fair, the US had no other choice. Under the French president Charles de Gaulle’s policy, France was aggressively borrowing USD on the market using its national credit and exchanging for actual gold in the US.
(Economics 101, in any state-run money printing institution, if you have $100 dollars worth of reserve (Gold). You don’t just print and lend $100 dollars to the market and earn interest. A conservative approach is that you would print at least $300 dollars to lend to the market. Like it or not, this is how the world functions now.)
So while France could borrow unlimited USD on the market. The actual gold reserve was always limited. So when people found out that the USD they hold in their hands can no longer exchange for Gold. The USD would inevitably crash. Then France can easily repay back those borrowed USD, because they would be worth nothing. (George Soros’ playbook.)
So what does it mean in today’s world?
All governments are printing money solely based on credit. However, they are more or less tied to the USD, which is based on… nothing. (They claim it is based on oil trading, but it’s just superficial. The key to any currency is Trust. What stops all other countries from ditching USD and use some other currency instead? That is the million dollar question.)
So as an outsider, how would you “trust” another government? (Hint: nothing to do with politics. Regardless of whether you like a person or not, a rational person would still want to make ends meet.)
If you think a government is going to fall, would you trust it?
If you think a government is going bankrupt, would you trust it?
These are the key questions to Trust.
Nobody believed the US would fall. Their military budget is more than the next 12 countries combined. They attracted the best minds across the globe. The government style was perceived to be stable and well-functioning.
The answer to the second question is even easier. You can just print money as the USD is based on nothing. How could you go bankrupt? (In reality, it’s more complicated than that, but this core reason is still valid.)
The beginning of the end of USD era
Yes, US can just print money out of thin air. But it is not without any repercussion.
- While the US is printing money like there is no tomorrow. Other countries are finding out the USD they hold is devaluing at a visible speed. They already have very good incentive to gradually diversify their foreign currency holding.
- With the war currently going on between Russia and Ukraine. Russia is banned from using SWIFT code. Russian individuals’ assets are being frozen. (What about “we are not against the people, only against the government” argument? I thought that saying only left your mouth 2 months ago.) A lot of countries understand the US is holding you by the balls. Another incentive to move away from the USD.
- Then we see Russia is demanding to use Rubles for purchasing of Russia Gas. This incident itself has no impact on the trading currencies internationally. As Rubles contribute about less than 1% on the world trading stage. BUT it has revealed options for other countries. Why does everybody still need to trade in USD?
However, with everything I just listed above. I still don’t believe the USD would crash overnight or in the next few years. It’ll be a long and slow decline of usage.
So if you are a Nigerian government or entity and your only savings are currently in USD. I don’t see that is a problem. However if you lots of assets and majority of them are with USD. I would recommend to diversify that asset class sooner than later.