IMF Raises Nigeria’s Economic Growth Projection to 3.4%

•Hails country’s non-oil sector growth momentum

Nume Ekeghe

The International Monetary Fund (IMF) has raised Nigeria’s 2022 economic growth forecast from the 2.7 per cent it had previously estimated, to 3.4 per cent.

Additionally, the fund reviewed upward the country’s 2023 growth prediction, from 2.7 per cent to 3.1 per cent.

These were contained in the IMF’s latest World Economic Outlook (WEO), titled: “War Sets Back the Global Recovery,” that was released on the side-lines of the ongoing IMF/World Bank hybrid spring meetings in Washington DC.

The multilateral institution noted that the non-oil sector played a pivotal role in increasing Nigeria’s growth prospect, noting that globally only 86 per cent of countries saw a downward revision of its growth projection. It indicated that Nigeria was amongst 14 per cent of countries that had been estimated to record growth.

On Nigeria’s growth forecasts, Division Chief Research Department, Mr.  Malhar Nabar, while responding to a THISDAY question, during a media briefing said, “The heterogeneity is a key factor, if you look at the global revisions that we have 86 per cent of the global economy revising down and Nigeria is one of the few that’s actually revised up and there are two main factors: one is what you mentioned, the increased oil price, which represents a favourable terms of trade effect for Nigeria, will increase oil production and oil exports.

“And then the second factor is the strong momentum that we saw in the non-oil sector part of the economy. The non-oil sector of the economy is also showing strong momentum going into this year, which helped lift the outcome, growth forecasts that we have for Nigeria to 3.4 per cent for this year, and 3.1 per cent for next year, and that’s 0.7 percentage point increase for this year and 0.4percentage point increase your next.”

IMF Chief Economist, Mr. Pierre-Olivier Gourinchas, also noted that oil price increase played a role in the upward review.

Gourinchas said, “Nigeria is an energy producer and exporter. And I think that explains a good part of the upward revision in our growth projections.”

However, IMF in the WEO noted, “The increase in oil prices has however lifted growth prospects for the region’s oil exporters, such as Nigeria. Overall, growth in sub-Saharan Africa is projected at 3.8 per cent in 2022.

“In sub-Saharan Africa, food prices are also the most important channel of transmission, although in slightly different ways. Wheat is a less important part of the diet, but food in general is a larger share of consumption.

“Higher food prices will hurt consumers’ purchasing power particularly among low-income households and weigh on domestic demand. Social and political turmoil, most notably in West Africa, also weigh on the outlook.”

Commenting on the global economy Gourinchas said policymakers should also ensure that the global financial safety net operates effectively.

According to him,“For some countries, this means securing adequate liquidity support to tide over short- term refinancing difficulties. But for others, comprehensive sovereign debt restructuring will be required.

“The Group of Twenty’s Common Framework for Debt Treatments offers guidance for such restructuring but has yet to deliver. The absence of an effective and expeditious framework is a fault line in the global financial system.

“Particular attention should also be paid to the overall stability of the global economic order to make sure that the multilateral framework that has lifted hundreds of millions out of poverty is not dismantled.

“In this difficult environment, national-level policies and multilateral efforts will play an important role. Central banks will need to adjust their policies decisively to ensure that medium- and long-term inflation expectations remain anchored. Clear communication and forward guidance on the outlook for monetary policy will be essential to minimise the risk of disruptive adjustments.”

He added, “Several economies will need to consolidate their fiscal balances. This should not impede governments from providing well-targeted support for vulnerable populations, especially in light of high energy and food prices.

“Embedding such efforts in a medium- term framework with a clear, credible path for stabilising public debt can help create room to deliver the needed support.”