Nigeria’s 2022 real GDP (Gross Domestic Product) growth rate has been revised down by the World Bank from 3.2 percent to 3.1 percent, reflecting the country’s deteriorating economic performance over the previous six months. As presented in the organization’s most recent Nigeria Development Update (NDU), which was presented in Abuja, unless the country made some tough decisions in the coming months and years, the bank projected a further economic collapse. Concerning GDP growth, the World Bank now expects that real GDP will enhance by 3.1 percent in 2022 to 2.9 percent in 2023-24, which is down 0.3 of a percentage point from the projections made during the period of the June 2022 NDU.
Ever since the previous report, which was released in June 2022 with the title, “The Continuing Urgency of Business Unusual,” the organization claims that the economic growth of Nigeria has deteriorated since then. Even though global oil prices are favorable, ‘Business as usual’ management of the economy is not achieving the desired results, and regardless of whether a crisis is evaded in the relatively close, long-standing regulatory and institutional issues are continuing and severely restricting the economy.
High inflation and central banks’ monetary policy are economic setbacks.
It was discovered that the world economy has become less favorable, with economic activities in the majority of the world’s most influential countries getting slowed in 2022 as a consequence of high inflation, as well as central banks leaning toward recessionary monetary policies. The bank observed that the inflation rate in consumer prices have been on the rise and is now among the highest seen anywhere in the world. The increase in the consumer price index, which was already occurring rapidly, picked up speed in 2022 through October, reaching a 17-year high of 21.1% year-over-year growth.
The bank observed the absurdity that, unlike other oil-producing countries throughout the world, the Nigerian economy has still not benefited from the high prices of oil. Despite higher global oil prices, it was noted that external and budgetary constraints had increased. In the past, oil price booms have helped the Nigerian economy. However, this has yet to be the case in 2021 and 2022. Even though the average crude oil price surged by more than 150 percent between 2020 and 2022, the country’s macroeconomic performance deteriorated, and its economy declined during this time.
High production costs lead to the country’s oil fall.
Nigeria is not profiting from increased oil prices for two reasons: Firstly, Lower oil production: Since 2020, Nigeria’s crude oil production has fallen underneath the Petroleum Exporting Countries (OPEC) quota due to high costs of production, theft and insurgency, joint-venture cash-call defaults, and underinvestment. Second, rising petrol subsidy costs: The petrol subsidy (subtracted straight from oil earnings) will cost 2.5–2.7 percent of the Gross domestic product in 2022. Due to this and the prolonged drop in oil production, the government has received the lowest net oil profits in almost a decade.
Therefore, the bank cautioned that carrying on with “business as usual” measures in Nigeria would amount to a decision to limit people’s opportunities. The bank urged the Nigerian government to take swift steps to regain macroeconomic stability by, among other things, raising oil and non-oil revenues, decreasing inflation through a structured and organized mix of trade, budgetary and financial policies to reinstate situations for private growth and investment; eliminating the fuel subsidy; and implementing a solitary, market-responsive rate of exchange.
Nigeria’s economy could improve if it uses its untapped potential.
Alex Sienaert, co-author of the report who is also the World Bank Lead Economist for Nigeria remarked that past series of reform success and rapid growth, for instance, in the 2000s, suggest that Economic growth could change rapidly because Nigeria has enormous untapped economic potential. The lives of 80 million poor Nigerians, the economy of Nigeria as a whole, and the continent of Africa would be transformed if Nigeria decided to adopt changes that strengthen its macroeconomic policy settings and boost investment.