Nigeria’s economic outlook faces a downward revision as the World Bank lowers its GDP growth forecast for the year 2023.
The latest report highlights significant challenges that could hinder the country’s economic progress.
Furthermore, per capita income growth struggles to make meaningful strides, posing obstacles in the fight against extreme poverty.
According to the World Bank report, Nigeria’s GDP growth rate is projected to reach 2.8% in 2023, marking a slight revision downward from earlier forecasts.
The following year, a modest improvement to 3.0% is expected. However, despite these growth projections, the report warns that per capita income growth remains sluggish, raising concerns about poverty alleviation efforts.
The latest report from the National Bureau of Statistics reveals Nigeria’s GDP grew by 2.3% in the first quarter of 2023.
The challenges faced by Nigeria are part of a broader economic slowdown across Sub-Saharan Africa (SSA).
- The report reveals that growth in SSA is expected to slow from 3.7% in 2022 to 3.2 percent in 2023, with a moderate improvement to 3.9% projected for the following year.
- The downgrade is primarily attributed to an abrupt slowdown in South Africa, but downgrades are widespread across energy and metal producers, as well as non-resource-rich countries within the region.
- The report highlights limited access to external borrowing as a significant constraint on the region’s economic recovery. As debt burdens and financing needs increase, the ability to secure necessary funds becomes more challenging.
Moreover, high costs of living are projected to continue restraining private consumption across the region. With limited fiscal space and tight monetary policies, investment growth is also expected to be weighed down.
Global Economic Growth
The World Bank also expects global economic growth to slow down to about 2.1% in 2023 due to monetary policy tightening.
- After growing 3.1 percent last year, the global economy is set to slow substantially in 2023, to 2.1%, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery in 2024, to 2.4%.
- Global growth could be weaker than anticipated in the event of more widespread banking sector stress, or if more persistent inflation pressures prompt tighter-than-expected monetary policy.
- Weak growth prospects and heightened risks in the near term compound a long-term slowdown in potential growth, which has been exacerbated by the overlapping shocks of the pandemic, the Russian Federation’s invasion of Ukraine, and the sharp tightening of global financial conditions.
Structural Issues Nigeria’s Economic Growth
Nigeria’s economic growth heavily relies on the non-oil sector as structural challenges persist in the oil industry.
- The report highlights limitations in oil production due to ongoing hurdles, resulting in an increased emphasis on non-oil sectors to drive economic expansion.
- However, Nigeria faces several obstacles that hinder its growth momentum.
- Foreign exchange restrictions, high living costs, security challenges, and limited fiscal space are among the factors restraining the country’s economic progress.
One critical aspect of Nigeria’s economic landscape is the struggle to improve per capita income.
The World Bank report reveals that per capita income is projected to grow by an average of only 0.4 percent annually in 2023-2024, far slower than that needed to make significant inroads into mitigating extreme poverty.
Poverty likely to persist
This slow pace of growth falls significantly short of what is needed to make substantial progress in reducing extreme poverty.
The findings underscore the urgency for robust measures to address the structural challenges and boost Nigeria’s economic potential.
- Additionally, Nigeria faces elevated financing needs, driven by higher borrowing costs, lower oil production and prices, and persistent fiscal and external pressures.
- Weak domestic revenue mobilization further exacerbates these challenges, adding to the strain on Nigeria’s economic recovery and growth prospects.
- To overcome these hurdles, Nigeria must prioritize structural reforms aimed at diversifying the economy and reducing its reliance on oil revenues.
Addressing the obstacles in the oil sector, improving infrastructure, and creating a more favorable business environment will be crucial steps toward fostering sustainable economic growth.
What this means
The revised GDP growth forecast and the concerns regarding per capita income growth serve as a wake-up call for policymakers and stakeholders in Nigeria.
- Efforts to address these challenges and implement necessary reforms will play a pivotal role in unlocking the country’s economic potential and setting it on a path toward inclusive and resilient growth.
- The World Bank report serves as a reminder of the significant hurdles Nigeria faces on its economic journey.
- By addressing the structural challenges, Nigeria can pave the way for a more prosperous future, where economic growth translates into tangible improvements in the lives of its citizens.