By Adedapo Adesanya
Nigeria’s economy will grow 2.8 per cent as oil production remains subdued, a World Bank report said on Wednesday.
This is coming as growth across Sub-Saharan Africa remains sluggish, dragged down by uncertainty in the global economy, the underperformance of the continent’s largest economies, high inflation, and a sharp deceleration of investment growth.
In the latest Africa’s Pulse report, the global body said Nigeria was underperforming its expected long-term growth rates due to weakening performance, especially in the non-oil activity following a slow uptick in the country’s oil production in the last few months.
The report said activities are further impacted by headwinds worsened by a weaker local currency and foreign exchange scarcity.
“In Nigeria, oil production picked up in late 2022, thanks to improved security that has so far prevented further oil theft; however, production remains below the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) quota.”
Nigeria’s oil production currently stands at 1.6 million barrels per day as against the expected 1.8 million barrels allocated by the 23-man alliance.
“Non-oil economic activity remained weak as the agriculture and industrial sectors experienced a rapid increase in the costs of energy and raw materials that were magnified by a weaker naira in the foreign exchange market,” the report said.
It warned that although headline inflation appears to have peaked in the past year, inflation is set to remain high, and this could see further increase in interest rates after the Central Bank of Nigeria (CBN) hiked it by 50 basis points to 18 per cent in March.
In November 2022, the apex bank increased it by 100 basis points, from 16.5 per cent to 17.5 per cent.
“Inflation rates remain high and above targets despite the early and sizable interest rate hikes undertaken by African central banks. For instance, the monetary authorities in Ghana, Mozambique, Nigeria, South Africa, and Uganda, among others, raised their monetary policy rates swiftly to record highs over the past two years,” the report noted.
In the Sub-Saharan African economy, the World Bank expects economic growth in the region to slow from 3.6 per cent in 2022 to 3.1 per cent in 2023, adding that a slowdown in aggregate demand, declining commodity prices, and the effects of the monetary policy tightening across the continent will lower inflation in the region to 7.5 per cent in 2023, and further to 5.0 per cent in 2024.
It warned that “Consumer price inflation in Sub-Saharan Africa accelerated sharply and hit a 14-year record high in 2022 (9.2 per cent), fueled by rising food and energy prices as well as weaker currencies.”
Also, domestic food prices will remain high despite the gradual decline in world food prices due to weaker currencies and higher input costs (transport fuels and fertilizers).
Adding his input, Mr Andrew Dabalen, World Bank Chief Economist for Africa, said, “Policymakers need to redouble efforts to curb inflation, boost domestic resource mobilization, and enact pro-growth reforms—while continuing to help the poorest households cope with the rising costs of living.”
Modupe Gbadeyanka