…cites rising production costs, underperforming oil and gas sector and insecurity
The Washington-based institution, the World Bank Group has downgraded Nigeria’s growth projection for 2023 and 2024 to 2.9 percent, as against the 3.1 percent it had
According to the projection in its latest Global Economic Prospects (GEP) released on Tuesday, the bank noted that the downgrade was a result of the underperforming oil and gas sector, insecurity, floods, and rising production costs.
The bank stated that growth in Nigeria, the largest economy in Sub-Saharan Africa (SSA) weakened to 3.1 percent in 2022, a 0.3 percentage point downgrade from the June projection. Oil output dropped to 1 million barrels per day, down by over 40 percent compared to its 2019 level, reflecting technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment, partly because of the diversion of oil revenues to petrol subsidies, estimated at over two percent of GDP in 2022.
It stated that 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
A strong recovery in non-oil sectors it said moderated the situation in the second half of the year as floods and surging consumer prices and annual inflation surpassed 21 percent for the first time in 17 years disrupting activity and depressed consumer demand.
It however stated that growth momentum in the non-oil sector is likely to be restrained by continued weakness in the oil sector. Existing production and security challenges and a moderation in oil prices are expected to hinder a recovery in oil output.
“Persistent fuel and foreign exchange shortages, with the naira depreciating by over 30 percent last year in the parallel market, further dampened economic activity. In Nigeria, growth is projected to decelerate to 2.9 percent in 2023 and remain at that pace in 2024 barely above population growth.
“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.
“As 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.”
On the projected growth for the region, the bank stated: “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. 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, weakening growth in advanced economies and China is expected to pose headwinds for external demand, particularly among exporters of industrial commodities.”
It noted that the region was constrained to accessing external financing, adding that tight fiscal space and high borrowing costs were expected to markedly limit many governments’ ability to spur faster growth.
“The modest downward revision to regional growth this year primarily reflects small downgrades for the largest economies.
“Forecast revisions for individual countries are mixed, with downward revisions for almost 60 percent of countries. This includes downward revisions for over 70 percent of metal exporters, which are expected to be affected by the further easing of global metal prices.
“In more diversified economies, lower prices of imports are expected to have a stronger positive effect by boosting activity in services and agriculture; nevertheless, for one in three SSA economies, the growth projection for 2023 has been revised down for the second time in a year.”