In its latest Global Development Prospect report, the World Bank cautioned that Nigeria’s economic growth is proceeding at a sluggish pace, posing a challenge to addressing the country’s alarming levels of extreme poverty. While the bank retained its forecast of a 2.8% economic growth (Gross Domestic Product, GDP) for Nigeria in 2023, it highlighted key obstacles such as high inflation, foreign exchange shortages, and banknote shortages resulting from currency redesign.
The World Bank also downgraded its economic growth projection for Sub-Saharan Africa to 3.2% in 2023, compared to the previously projected 3.4% in its April World Economic Outlook. The global economic growth forecast for 2023 was adjusted to 2.1%, reflecting concerns over financial risks. The report indicates that after a 3.1% expansion in 2022, the global economy is expected to considerably slow down before experiencing a modest recovery in 2024, reaching 2.4%.
Commenting on the economic outlook, the World Bank stated, “Growth in Sub-Saharan Africa (SSA) continued to decelerate earlier this year owing to various country-specific challenges and heightened external economic headwinds. Growth in the three largest SSA economies – Nigeria, South Africa, and Angola – slowed to 2.8% in 2022 and continued to weaken in the first half of this year.”
The report highlighted that Nigeria’s growth momentum in the non-oil sector, which was expected to rebound post-pandemic, has been dampened due to persistently high inflation, foreign exchange shortages, and banknote shortages resulting from currency redesign. Furthermore, the growth in Nigeria is projected to remain just above the population growth rate, falling short of the necessary speed required to make significant progress in reducing extreme poverty.
The World Bank anticipated a further decline in Sub-Saharan Africa’s growth to 3.2% in 2023, with a subsequent pickup to 3.9% in 2024. In the case of South Africa, the recovery is predicted to slow to 0.3% this year due to widespread power outages hampering economic activity and contributing to persistent inflation.
The report also noted that the downgrades in economic outlook extend beyond major regional economies, with the cost of living limiting private consumption and tighter policies hindering investment in many countries. The combination of domestic vulnerabilities, global financial constraints, and weak global growth is expected to keep economic recoveries subdued.
The World Bank’s warning underscores the urgent need for Nigeria to address the structural challenges impeding economic growth and tackle issues such as inflation, foreign exchange availability, and currency redesign. By implementing targeted policies and reforms to attract investment, enhance productivity, and diversify the economy beyond oil, Nigeria can foster sustainable and inclusive economic growth, thereby making substantial progress in reducing extreme poverty in the country.
Moreover, the recent removal of fuel subsidy, has had a significant impact on the country’s economic landscape. The decision to remove subsidies was aimed at reducing fiscal burdens and redirecting resources towards critical sectors such as healthcare, education, and infrastructure. However, the removal of subsidies has resulted in a surge in fuel prices and an increase in the cost of living for ordinary Nigerians. This has further exacerbated the challenges faced by the population, particularly those living in poverty. The removal of subsidies has placed an additional burden on already struggling households, making it even more difficult for them to make ends meet and pushing them further into poverty.
As the Nigerian government continues to navigate these challenges, it is crucial to prioritize measures that stimulate economic expansion, foster job creation, and improve living standards for all citizens. The international community, development partners, and stakeholders within the country must collaborate to support Nigeria in its endeavors to overcome these obstacles and achieve sustainable and equitable economic growth.