The International Monetary Fund (IMF) has said that Nigeria’s economy will decline from 3.2 percent in 2023 to 3.0 percent in 2024, indicating a 0.2 percent drop.
This is contained in the IMF report entitled, “World Economic Outlook: A Rocky Recovery (2023 Apr),”released on Tuesday.
At the beginning of every quarter, the IMF publishes its World Economic Outlook, which provides information about the economic activities around the world.
In its recent forecast, the Washington-based lender predicts that the global economy will fall to 2.8 percent this year from the 3.4 percent recorded in 2022. It notes that the global economy will rise to 3.0 percent in 2024. This will nevertheless be lower than the 2022 economic growth, which was pegged at 3.4 per cent.
“The baseline forecast is for growth to fall from 3.4 per cent in 2022 to 2.8 per cent in 2023 before settling at 3.0 per cent in 2024,” the IMF says in its latest report.
For Nigeria, the IMF notes in its latest report that the nation’s economic growth will grow by 3.2 percent this year. In the January edition of the forecast entitled, “World Economic Outlook: Inflation Peaking amid Low Growth (2023 Jan)”, the IMF had predicted the same 3.2 percent growth rate for 2023. Put differently, the IMF retained its 2023 forecast of 3.2 percent economic growth for Nigeria in its April report.
However, the projection for 2024 in the April report shows little optimism for Nigeria. In its January update, the IMF had projected a 2.9 percent economic growth for Nigeria in 2024. But in the April update, it has raised the country’s 2024 economic growth projection to 3.0 percent.
On possible reasons for high growth projects in 2024, Chief Executive Officer of the Centre for Promotion of Private Enterprise, Dr Muda Yusuf, states that it may be because of Nigeria’s improvement in oil output. Yusuf said, however, that no positive development has taken place in the policy space.
“Our oil output has been improving, and that definitely will have some positive impact on our growth outlook. As far as policies are concerned, the policy environment has not changed. So, I can’t ascribe it to any positive development in the policy space,” he says.
It is worth highlighting that the new forecast for 2024 in the April update will still be lower than the projection for 2023.
For sub-Saharan Africa, economic growth is expected to remain moderate at 3.6 percent, according to the report. This is a fall from 3.9 percent in 2022. However, in 2024, economic growth will pick up to 4.2 per cent in the continent, the report says.
Senegal, the Democratic Republic of the Congo (DRC), Côte d’Ivoire, Rwanda, Ethiopia, and Niger are projected to record the most economic growth in 2023.
The economic growth of Niger, Senegal, Mozambique, Rwanda, Côte d’Ivoire, and DRC are projected to be highest on the continent in 2024.
According to the forecast, Equatorial Guinea will experience negative growth in 2023 and 2024. -1.8 percent in 2023 and -8.2 percent in 2024.
The projected economic growth for South Africa, Ghana, São Tomé and Principe, and Lesotho will be lowest in 2023, according to the report. The situation is similar in 2024. The only difference is that Eswatini will replace Ghana on this list as the bottom country with the lowest growth in 2024. Ghana’s economy is projected to hit 2.9 percent in 2024, up from its projected 1.6 percent growth for this year.
Speaking on the projected economic outlook for Nigeria, Dr Yusuf highlights some external and domestic factors.
On the foreign front, Dr Muda cites the challenges from the Russian invasion, the lingering effects of COVID-19, and the ongoing financial market crisis in the advanced economies. He explains that these three factors have continued to pose challenges for Nigeria from the view of energy cost because Nigeria is vulnerable to the energy problem because it imports all its energy needs.
With respect to domestic factors, Dr Muda says lack of reforms is hurting the economy. “We have not been able to undertake the kind of reforms we should undertake. Reforms around our foreign exchange policy are still a drag on our economy and have serious negative effects on investment/capital inflow,” he says.
Recall that last week, Dataphyte had noted in a report that Nigeria’s foreign investments slumped to $5.3 billion at the end of 2022, which was the lowest the country recorded in six years.
According to Dr Muda, the decline is a reflection of downside risks for the Nigerian economy.
Dr Muda also says the country’s high debt is worrisome. The country’s debt is estimated at N70-N80 trillion. According to him, this also has a downside risk for the economy.
Related to this, he says oil theft and subsidy are key challenges for the country
On the way forward to improving the country’s economic outlook, particularly for the next administration, Dr Muda recommends that Nigeria needs to reform its forex exchange policy. “We cannot continue to run an economy with these multiple exchange rates. This has to stop,” he suggests.
He also advises that Nigeria needs to move forward with the Petroleum Industry Act (PIA) in a holistic way, noting that the country’s tax system should be more progressive.
On his part, Director-General of the Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi-Kadir, asks the next government to direct the Central Bank of Nigeria (CBN) to prioritise providing the foreign exchange to the productive sector, particularly manufacturers, to enable them to import raw materials, spare parts, and machinery that are not locally available.
“There is a need to take immediate and time-bound steps to achieve the unification of the foreign exchange window. Also, direct the Nigerian Electricity Regulatory Commission (NERC) to admit all qualified applicant companies into the Eligible Customer Scheme in order to allow them access to power as stipulated in the Electric Power Sector Reform Act 2005.”