The International Monetary Fund (IMF) has reduced Nigeria’s growth prospects over low crude oil production and severe flooding among other challenges currently bedevilling the country’s economy.
The fund, in its recently published World Economic Outlook (WEO), noted that “Nigeria’s growth prospects for 2024 dropped to 2.9% from 3.3%” published in its last report.
It blamed the downgrade, particularly on the effects of recent inflation, flooding and oil production setbacks.
This is as it projected global economic growth in 2025 to remain unchanged at 3.2%.
The projection for the global economy represents a decline of 0.1% from the fund’s earlier projection in July 2024.
International Monetary Fund managing director Kristalina Georgieva delivers a curtain raiser speech on the outlook for the global economy and policy priorities ahead of the 2024 Annual Meetings of the IMF and the World Bank Group in Washington, DC, October 17, 2024. (Photo by Brendan Smialowski / AFP)
For Nigeria, the IMF’s recent GDP growth projection for 2025 represents a 0.2% increase from its earlier projection in July this year.
The GDP growth in 2024 will stay at 2.9% – a downgrade compared to its projection in July of this year, according to the fund.
On inflation, it projected Nigeria’s inflation to steady at 25% in 2025 and 14% by 2029.
“Nigeria’s economy in the first and second quarter of the year grew by 2.98% and 3.19% respectively amid a surge in inflation and further depreciation of the naira.
“The GDP growth rate in the first two quarters of 2024 surpassed the figure for 2023, representing resilience despite severe macroeconomic shocks with a spike in petrol prices and a 28-year high inflation rate.
“Nigeria’s inflation rate only began to slow down in July 2024 after 19 months of consistent increase dating back to January 2023.
“However, after two months of slowdown hiatus, inflation continued to rise on the back of an increase in petrol prices by the NNPCL in September,” the report said.
Speaking further on the report, the IMF attributed its downward revision to two major factors, agricultural disruptions caused by severe flooding and security and maintenance issues hampering oil production.
These challenges, according to the division chief in the IMF’s Research Department, Jean-Marc Natal, were key drivers of the revision.
Natal said: “There has been, over the last year and a half, some progress in the region. You saw, inflation stabilising in some countries, going down even and reaching a level close to the target. So, half of them are still at a large distance from the target, and a third of them are still having double-digit inflation.
“In terms of growth, it’s quite uneven, but it remains too low. The other issue is that in the region it is still high. It has stopped increasing, and in some countries already starting to consolidate, but it’s still too high, and the debt service is, correspondingly, still high in the region.”
International Monetary Fund managing director Kristalina Georgieva departs after delivering a curtain raiser speech on the outlook for the global economy and policy priorities ahead of the 2024 Annual Meetings of the IMF and the World Bank Group in Washington, DC, October 17, 2024. (Photo by Brendan Smialowski / AFP)
In a separate briefing to release the Global Financial Stability Report, Assistant Director, Monetary and Capital Markets Departments, Jason Wu, however, noted that Nigeria’s economy is on a path to stability as a result of the reforms taken by the government.
The downgrade in economic growth comes as some Nigerian states battle severe flooding, especially that recently reported in Maiduguri.
The Word Bank in its latest report also said the country’s Inflation rate escalated for 13 consecutive months due to various factors, including the removal of fuel subsidy, which led to increased transportation and production costs, and the depreciation of the naira against major currencies.
A breakdown of the National Bureau of Statistics monthly inflation report showed that the average price of commodities moved from 22.41 per cent in May to 22.79 per cent in June. In July, the rate increased by 1.29 per cent to 24.08 inflation rate. August inflation was 25.80 per cent, September (26.72), October(27.33), November (28.20), December (28.92).
As of late 2023, inflation surged, driven by higher prices for food, energy, and essential goods.
By January 2024, the inflation rate increased further to 29.90 per cent, mainly on the cost of food items.
It was 31.70 per cent in February, 33.20 per cent in March, 33.69 per cent in April, 33.95 per cent inMay, and 34.19 per cent in June 2024 before it dropped to 33.40 per cent in July, 32.15 per cent in August and 32.70 per cent in September.
Also, Nigeria is currently battling low crude oil production as a result of pipeline vandalism and crude oil theft.
