Global Commodity Prices Could Dampen Growth in Nigeria in 2023—World Bank

January 10, 2023
dampen growth in Nigeria
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By Dipo Olowookere

The World Bank Group has projected that Nigeria would record economic growth of 2.9 per cent in 2023 amid the headwinds, especially relating to crude oil production hampered by theft, warning that global commodity prices could dampen growth in Nigeria and others in the sub-Saharan African region in the year.

In 2022, Nigeria’s economy slowed as a result of aggravated inflation, floods, and crude oil theft. The global lender believes that the effects of these challenges will extend to this year.

In a report released on Tuesday, World Bank noted that this year, sub-Saharan Africa would collectively witness a 3.6 per cent improvement in its gross domestic product (GDP) and 3.9 per cent next year.

“Even as the cost of living pressures are anticipated to moderate, the negative impact of persistent poverty and food insecurity on growth, amplified by other vulnerabilities, such as unfavourable weather, high debt, policy uncertainty, and violence and conflict, are anticipated to keep the pace of recoveries subdued in many countries,” a part of the report stated.

The lender said last year, growth in the three largest economies in the region, Angola, Nigeria, and South Africa, pulled back sharply to 2.6 per cent.

Giving an analysis of each of the countries, it said the region’s second-largest economy, South Africa, reported a mere 1.9 per cent growth as electricity shortages worsened and policy tightening accelerated to curb inflation.

“Policy uncertainty, flagging external demand, and disruption due to floods and strikes weighed on growth,” it further said of South Africa.

As for the region’s largest economy, Nigeria, World Bank said growth weakened in the year under review as production challenges in the oil sector intensified.

“Annual inflation in Nigeria exceeded 21 per cent last year—its highest level in 17 years, prompting more policy tightening.

“Food affordability for vulnerable populations deteriorated further amid disruptions to farming and sizable population displacement because of recent devastating floods,” it stated.

In the case of Angola, it disclosed that, “High oil prices and stable oil production supported a 3.1 per cent rebound.”

Commenting on the risks for the SSA growth for this year, the global financial institution said, “The outlook is subject to many downside risks. A deeper-than-anticipated slowdown of the global economy could cause sharp declines in global commodity prices, dampening growth in SSA exporters of oil and industrial metals.

“Global financial conditions could tighten more if global inflation pressures persist longer than expected, leading to higher borrowing costs and a higher risk of debt distress in many SSA economies.

“SSA food systems, already stressed by elevated costs of farming inputs and weather-induced production losses, remain particularly vulnerable to further disruptions that could lead to surging food prices and increased food insecurity.

“High levels of violence and conflict could escalate further if living standards continue to deteriorate. This, together with increased frequency and severity of climate change-induced weather shocks, could further disrupt agriculture and delay large infrastructure and mining projects in some countries.”

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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