Nigeria’s economic growth to slow down as inflation erodes consumer spending — IMF

By Sodiq Adelakun

The International Monetary Fund (IMF) has revised its economic growth forecast for Nigeria in 2024, lowering it to 3.0 percent from the previously projected 3.1 percent in October last year.

This adjustment was highlighted in the IMF’s ‘World Economic Outlook Update, January 2024,’ which was released on Tuesday.

According to the IMF’s latest figures, Nigeria’s economy is expected to have expanded by 2.8 percent in the previous year, which is marginally below the 2.9 percent growth it had predicted in its October report.

Looking ahead, the IMF anticipates a modest recovery for Nigeria, with an expected growth rate of 3.1 percent in 2025.

However, the IMF’s projection for 2024 falls short of the Nigerian government’s more optimistic expectation of a 3.76 percent growth rate.

The discrepancy underscores the challenges facing Africa’s largest economy, particularly in its pivotal oil and gas sector.

In its October assessment, the IMF attributed Nigeria’s decelerating growth to diminishing oil and gas production, which has been a persistent issue for the country.

The IMF also noted that the impact of high inflation on consumer spending is likely to continue to exert a negative influence on the nation’s economic performance.

At the time, it said, “Growth in Nigeria is projected to decline from 3.3 percent in 2022 to 2.9 percent in 2023 and 3.1 percent in 2024, with negative effects of high inflation on consumption taking hold.

“The forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work.”

In the third quarter of 2023, Nigeria’s GDP grew by 2.54 per cent year-on-year in real terms according to the National Bureau of Statistics.

Commenting on economic growth recently, the Central Bank of Nigeria Governor, Olayemi Cardoso, said, “The projections for the nation’s economy paint an optimistic trajectory as the Federal Government of Nigeria anticipates real GDP growth of 3.76 per cent in 2024, slightly surpassing the estimated 3.75 per cent for 2023.”

In its 2024 prediction for sub-Saharan Africa, the IMF expects the region’s economy to grow by 3.8 per cent.

It said, “In sub-Saharan Africa, growth is projected to rise from an estimated 3.3 percent in 2023 to 3.8 percent in 2024 and 4.1 percent in 2025, as the negative effects of earlier weather shocks subside, and supply issues gradually improve.

“The downward revision for 2024 of 0.2 percentage point from October 2023 mainly reflects a weaker projection for South Africa on account of increasing logistical constraints, including those in the transportation sector, on economic activity.”

Overall global economic growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025. 2024’s forecast is 0.2 percentage points higher than what the Washington-based lender projected in its October 2023 World Economic Outlook.

It stated that this expected growth is due to expected resilience in the United States and several large emerging markets and developing economies, as well as fiscal support in China.

It added, “The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 per cent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy.”