World Bank lowers Nigeria’s economic growth projection

Nigeria’s economic growth is projected to decelerate to 2.9 per cent in 2023 and remain at that pace in 2024, the World Bank has said.

The growth projection, barely above population growth, comes against the backdrop of challenges in the oil and non-oil sectors of the Nigerian economy, the Washington-based institution said in its latest Global Economic Prospects (GEP) released on Tuesday.

The World Bank said that a growth momentum in the non-oil sector is likely to be restrained by continued weakness in the oil sector while existing production and security challenges, and a moderation in oil prices, are expected to hinder a recovery in oil output.

Last December, the bank cut Nigeria’s 2022 growth forecast to 3.1 per cent from a previous forecast of 3.8 per cent.

In its Nigeria Development Update (NDU), the bank said that the nation had to make hard choices or face a worse economic downturn in the months and years ahead. The revision in growth projection, it added, was due to slow economic growth in the third quarter of 2022, due to a weak performance in critical areas of the economy.

In its latest projection, the bank said policy uncertainty, sustained high inflation, and rising incidence of
violence are anticipated to temper growth.

“Growth in agriculture is expected to soften because of the damage from last year’s floods,” it said.

Similarly, the nation’s fiscal position is expected to remain weak because of high borrowing costs, lower energy prices, a sluggish growth of oil production, and a subdued activity in the non-oil sectors.

Regional Outlook

The bank noted that growth in the Sub-Sahara African region is expected to improve within the period.

“Growth in SSA is projected to edge up in 2023 to 3.6 percent—a 0.2 percentage point downward revision from the June forecast—before picking up to 3.9 percent, in 2024,” it said.

“Even though an expected moderation of global commodity prices should temper cost-of-living increases, tighter policy stances to address elevated inflation and public debt will weigh on domestic demand.”

Meanwhile, the bank said that weakening growth in advanced economies and China is expected to pose headwinds for external demand, particularly among exporters of industrial commodities.

“Constrained access to external financing, tight fiscal space, and high borrowing costs are expected to markedly limit many governments’ ability to spur faster growth,” it said.

Among oil-producing countries, the bank said government debts fell by nearly 10 per cent of GDP on average, due to fiscal surpluses and stronger exchange rates.

The global economy is equally projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024, the bank said.

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The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95 per cent of advanced economies and nearly 70 per cent of emerging market and developing economies.