foreign investments are expected to be the main drivers of the economic growth in Nigeria.
The World Bank has projected that Nigeria’s economy would sustain its growth trend in the New Year, with the country’s gross domestic product, GDP, widely forecasted at 6.6 per cent from the 7.3 per cent level last year.
The Bank said in its latest Global Economic Prospects, GEP, report published on Wednesday that fresh foreign investments are expected to be the main drivers of the economic growth in sub-saharan Africa, including Nigeria.
According to the report, increased investment will be a major driving force of growth over the medium term, pointing out that since 2000, investment in the region has increased steadily from 15.9 per cent of GDP to over 22 percent of GDP in 2012, with increased number of the region’s economies tapping into international capital markets to help redress infrastructural constraints widely expected to sustain the growth pattern.
The report indicated that foreign direct investment to the region is expected to remain strong over the medium term, with a forecast that it would increase to new record levels each year reaching a peak of about $55.6 billion in 2015.
FDI inflows to the extractive industries sector, particularly oil and gas, petroleum and solid minerals as well as agriculture sector would be supported by spiralling commodity prices over the next two to three years.
Oil prices at the international crude oil market are projected to average between $102 per barrel by 2013, $102.2 by 2014 and $102.1 by 2015, while international capital flows to developing countries as percentage of GDP would be about 4.7%, 4.7% and 4.9% by 2013, 2014 and 2015 respectively.
In addition to growing foreign sources of investment finance, the report said domestic investment is also expected to benefit from the ongoing financial sector deepening in the region.
Over the past decade, the report said bank deposits as a share of GDP have increased by some eight percentage points, supporting a 10 percentage point increase in the private sector credit to GDP ratio during this period.
Noting the lag in monetary policy transmission, the report said widespread cuts in policy rates in 2012, is expected to provide some stimulus to economic activity through 2014.
While identifying the risks that could potentially derail the region’s growth prospects, the World Bank said such risks remain tilted to the downside, as the global economy remains fragile, amidst weaker growth in Chinese investment, ongoing fiscal consolidation in the wake of the Euro Area debt crisis, and weaker U.S. economy.
Besides, it also identified some external risks, bordering on a number of domestic concerns, such as political instability, protracted industrial disputes and adverse weather conditions. The World Bank said developing countries need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks.
Overall, the report noted that the global economic environment remains fragile and prone to further disappointment, although the balance of risks is now less skewed to the downside than it has been in recent years.
“Global growth is expected to come in at a relatively weak 2.3 per cent and 2.4 per cent in 2012 and 2013, respectively, and gradually strengthen to 3.1 per cent and 3.3 per cent in 2014 and 2015,” it observed, adding that at an estimated 5.1 per cent, GDP growth in developing countries during 2012 was among the slowest in 10 years.
It, however, averred that improved financial conditions, a relaxation of monetary policy and stronger high-income country growth is projected to gradually raise developing-countries’ growth to 5.5 per cent in 2013, 5.7 per cent in 2014 and 5.8 per cent in 2015 in line with their potential.
For high-income countries, it identified fiscal consolidation, high unemployment and very weak consumer and business confidence as the policies that would continue to weigh on activity in 2013, when GDP is projected once again to expand at a low rate of 1.3 percent.
The World Bank Group President, Jim Yong Kim, said “The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth.
“Developing countries have remained remarkably resilient thus far. But we can’t wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the stage for the stronger growth that we know that they can achieve in the future.”
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