IMF Says Nigeria’s Economic Growth May Shrink To 2.9%

February 1, 2023 Mary

IMF Says Nigeria’s Economic Growth May Shrink To 2.9%

Nigeria’s economic growth is predicted to shrink by 0.3 percentage points from 3.2 per cent in 2023 to 2.9 per cent in 2024, according to the International Monetary Fund (IMF).

This is as the global money lender stated that country’s economy is set to grow from 3.0 per cent in 2022 to 3.2 per cent in 2023 due to measures made to address insecurity in its oil sector.

Also, This year’s 3.2 per cent growth projection is an upgrade from the lender’s previous 3.0 growth projection for the year in its October outlook report.

The IMF disclosed this in its World Economic Outlook Update (January 2023) report. It stated that growth across sub-Saharan Africa would moderate at 3.8 per cent in 2023 amid prolonged fallout from the COVID-19 pandemic.

Power shortage is expected to tank South Africa’s growth economy from 2.6 per cent in 2022 to 1.2 per cent in 2023.

It said, “In sub-Saharan Africa, growth is projected to remain moderate at 3.8 percent in 2023 amid prolonged fallout from the COVID-19 pandemic, although with a modest upward revision since October, before picking up to 4.1 percent in 2024.

“The small upward revision for 2023 (0.1 percentage point) reflects Nigeria’s rising growth in 2023 due to measures to address insecurity issues in the oil sector. In South Africa, by contrast, after a COVID-19 reopening rebound in 2022, projected growth more than halves in 2023, to 1.2 percent, reflecting weaker external demand, power shortages, and structural constraints.”

The Washington-based lender explained that growth in the global economy will slow down in 2023 before bouncing back in 2024. This is as the global fight against inflation and Russia’s war in Ukraine weigh on activity.

Growth is forecasted to slow from 3.4 per cent in 2022 to 2.9 per cent in 2023, then rebound to 3.1 per cent in 2024.

According to the lender, its January forecast is a lot less gloomy than its October forecast and could hint at a turning point, with growth bottoming out and inflation declining.

It said, “Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe.

“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.

“Elsewhere, China’s sudden re-opening paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate. This, and a weakening of the US dollar from its November high, provided some modest relief to emerging and developing countries.”

According to the IMF, the tightening of monetary policy is beginning to cool demand and inflation, but its full impact is unlikely to be realized before 2024. It added that about 84 per cent of countries are expected to have lower headline inflation in 2023 with global inflation set to fall from 8.8 per cent in 2022 to 6.6 per cent in 2023 and 4.3 per cent in 2024.

Recently, the United Nations projected that a robust commodities trade and dynamic consumer goods and services markets would push Nigeria’s economic growth to three percent in 2023.

It said, “High inflation and power supply issues are impacting growth in Nigeria, but the economy will benefit from robust commodities trade and dynamic consumer goods and services markets, bringing growth to three per cent in 2023.”

In its own prediction for 2023, the World Bank stated that the Nigerian economy would grow at 2.9 per cent in 2023.

According to the bank, the poor economic growth of 2.9 per cent in 2023, is barely above population growth.

In 2022, crude oil production in Nigeria nosedived because of the activities of pipeline vandals and oil thieves. Production crashed to a low of 0.937mbpd in September 2022 but rebounded to 1.235 million barrels per day in December 2022.

According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, the Federal Government is targeting an economic growth rate of 3.5 per cent.

She stated that the performance of non-oil sector and the rebound of the oil sector would drive growth in 2023.

Speaking at with Bloomberg TV at the World Economic Forum in Davos, Switzerland, she said, “Well for 2023 we are looking at a growth of 3.5 per cent and we are looking at closing 2022 to around the same number as well. We are still waiting for our last quarter report to come out.

“Growth has slowed down a bit in the third quarter of 2022, and therefore we have had to moderate our year projections to reflect that decline. What will drive 2023 forward is the increase in revenue from the non-oil sector and also the beginning of the pickup of revenue from the oil sector itself.

“I am sure you know that we’ve had some problems regarding production but the production has picked up and it looks good to reach the number that we put int the budget. Our target for 2023 is 1.6 million barrels per day. We can comfortably achieve that. We are about 1.25 million, 1.3 million now average off. We should be able to reach that, and hopefully we surpass that as well with the measure that has been put in place.”