Marrakech, Morocco – October 10, 2023 – The International Monetary Fund (IMF) has revised its economic growth projection for Nigeria, downgrading it to 2.9 percent for the current year. This marks a decrease from the earlier projection of 3.2 percent made in April. The IMF cited several factors for this revision, including the effects of demonetization, high inflationary pressures, and various shocks impacting the country.
The downward revision for Africa’ s largest economy can be attributed to multiple challenges, including the effects of demonetization, high inflationary pressures, as well as shocks in agriculture and hydrocarbons. These issues have contributed to the reduced growth outlook for Nigeria.
However, there is optimism that the economy may see a slight recovery in 2024, with growth projected to reach 3.1 percent. This anticipated improvement is based on the positive impact of recent reforms initiated by President Tinubu’s administration. Key reforms include the removal of energy subsidies and the unification of exchange rates, which are expected to create a more favorable economic environment.
The IMF unveiled these forecasts in its latest World Economic Outlook (WEO) during the 2023 Annual Meetings of the IMF and World Bank, taking place in Marrakech, Morocco.
Daniel Leigh, Division Chief of the Research Department at the IMF, acknowledged the challenges facing Nigeria but expressed hope in the government’s recent policy measures. He highlighted that energy subsidy removal and exchange rate unification, among other initiatives, could help stimulate growth in the coming year.
The removal of energy subsidies is expected to reduce government spending on fuel subsidies, freeing up resources for other critical areas such as infrastructure development and social programs. Unifying exchange rates can improve transparency and reduce currency risk for businesses and investors, potentially attracting foreign investment. So far these policies has not worked as Nigerians continue to grapple with collapse of the naira and increased cost of fuel.
The IMF’s World Economic Outlook also provides insights into global economic trends. Globally, the IMF’s baseline forecast anticipates a slowdown in economic growth. The global growth rate is projected to decline from 3.5 percent in 2022 to 3.0 percent in 2023 and further to 2.9 percent in 2024. These figures fall below the historical average of 3.8 percent observed from 2000 to 2019.
Pierre-Oliver Gourinchas, Chief Economist and Director of the Research Department at the IMF, led the press briefing and noted that advanced economies are expected to experience a slowdown from 2.6 percent growth in 2022 to 1.5 percent in 2023, with a further decline to 1.4 percent in 2024 as policy tightening measures take effect.
For emerging market and developing economies, a modest decline in growth is projected, with figures expected to drop from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024.
One positive aspect in the global economic outlook is a decline in inflation rates. Global inflation is expected to decrease steadily, from 8.7 percent in 2022 to 6.9 percent in 2023, followed by a further decrease to 5.8 percent in 2024. This decline is attributed to tighter monetary policies, aided by lower international commodity prices.
The IMF’s report also noted that core inflation is expected to decline more gradually, and in most cases, inflation is not projected to return to target levels until 2025. These developments are indicative of the broader challenges and adjustments facing economies around the world.
As Nigeria grapples with its economic challenges, the government’s commitment to implementing reforms will be closely watched, with hopes pinned on these measures to drive growth in the coming years. While the road ahead may be challenging, the IMF’s forecast of potential growth in 2024 underscores the resilience of the Nigerian economy and the potential for positive change through policy reforms and strategic initiatives.