Nigeria’s economic growth projection has yet again witnessed another decrease by the World Bank Group noting the oil sector declination as the major acumen as revealed in its recent Global Economic Prospects report. The report projects that Nigeria’s economy will further decelerate from its current 3.1 percent to 2.9 percent in 2023 with no further growth expected in 2024. Notably, Nigeria’s growth had just decreased to 3.1 percent in 2022 , a 0.3 percent fall from the forecast made in June.
According to the World Bank Group, continuous decline in the oil sector generating poses a threat to the growth momentum in the non-oil sector, which can eventually have adverse effect on Nigeria’s oil-based economy. Oil output dropped to 1 million barrels per day, representing a fall by over 40 percent compared to its level in 2019. This shows the consequences resulting partly from the diversion of oil revenues to petrol subsidies, estimated at over 2 per cent of GDP in 2022 (NEITI 2022; World Bank 2022).
Incessant inflation rate which hit a record of 21 percent.
Among the consequences includes, technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment. A strong recovery in non-oil sectors moderated in the second half of the year as floods and incessant inflation rates which hit a record of 21 percent since the last 17 years, ravaged the country’s economy activities and market operation. Also, the bank further highlighted factors hindering the the country’s growth such as the low oil generation, insecurity, petrol subsidies, forex scarcity, among others, hamper growth in the country.
Additionally, persistent fuel and foreign exchange shortages, with the naira depreciating by over 30 percent last year in the parallel market, further dampened economic activity. It was also noted that the poor economic growth at 2.9 percent in 2023, will be barely above population growth, which is often said to be around 2.5 per cent in previous reports. This forecast came in a weeks following the bank downgrade of Nigeria’s economic growth forecast from 3.8 percent to 3.1 percent.
Essential macroeconomic structure will increase growth.
The report, which was prepared by the World Bank’s Nigeria Development Update (NDU), biannual World Bank report series, had revealed that Nigeria’s economy needs to grow faster in order to reduce poverty. It also noted that the increasing inflation had impoverished around five million more Nigerians into poverty since the start of 2022. Despite high oil export revenues, official reserves have fallen and the currency market is severely distorted, undermining the business environment and investment. This raises caution that the weaknesses in the macroeconomic policy framework are suppressing growth and making Nigeria more vulnerable to shocks.
However, there is an open chance for Nigeria to implement essential macroeconomic and structural reforms equipped with the necessary capacity to address the crises and vulnerable loops, while also increasing growth in the country. Taking such action will lift per-capital incomes, sustainably reduce poverty and deliver better life outcomes for many Nigerians. Nigeria also needs to make alternate and exigent business strategy moves to avoid a situation where up to 80 million working-age Nigerians do not have a full-time job by 2030.
Millions of impoverished Nigerians will benefit from the transformation.
Moreover, the World Bank Country Director for Nigeria, Shubham Chaudhuri asserts that up to 23 million Nigerians could be living in extreme poverty situation. On his part, Alex Sienaert, World Bank Lead Economist for Nigeria and co-author of the released Report explained that it would be of more beneficial gain for 80 million impoverished Nigerians, if the country could strategize and implement transformational moves to stabilize its macro-fiscal policy structure and promote investment in the country.