NESG: Only Comprehensive Reforms Will Change Nigeria’s Economic Trajectory, Deliver Shared Prosperity

Dike Onwuamaeze

The Nigerian Economic Summit Group (NESG) has called for comprehensive and system-driven economic reforms that would change Nigeria’s economic trajectory and create economic value and shared prosperity.

The NESG made this call yesterday, when it unveiled its 2023 Macroeconomic Outlook Report titled: “Nigeria in Transition: Recipes for Shared Prosperity,” in which it addressed pertinent questions relating to policy design, processes, and framing in creating economic prosperity for all. The report forecasted a real GDP growth of 2.98 per cent; inflation rate of 20.5 per cent; foreign reserve of $34.9 billion; unemployment rate of 37 per cent and poverty headcount of 45 per cent for Nigeria in 2023.

The Chief Executive Officer of the NESG, Mr. ‘Laoye Jaiyeola, said 2023 remains a transition year that offers the country a chance to reassess and adjust its growth strategy to implement effective and efficient reforms that would benefit the entire population.

Jaiyeola said: “In the NESG Macroeconomic Outlook for 2023, we stressed the importance of reforms in achieving shared prosperity in Nigeria. The report outlines the key factors that will support the two specific goals identified and provides policy recommendations to drive the economy towards a prosperous future for all.”

He said Nigeria must take advantage of, “this opportunity to realign its growth strategy and make the necessary reforms to improve the well-being of its citizens and create a more equitable and sustainable future.”

The NESG economic projections for Nigeria in 2023 assumed that crude oil future would average US$85 per barrel, which suggested that the effect of the Russia-Ukraine crisis on the energy market would remain subdued and that elevated demand for crude oil, “will sustain price at a level relatively higher than the US$70 per barrel proposed in the 2023 budget.”

It also projected that, “crude oil production will average 1.35 million barrels per day (mbpd) in 2023. This represents an improvement over 1.15mbpd in 2022 but is 20 per cent lower than the 2023 budgetary oil production of 1.69mbpd.” 

The NESG further projected that real GDP growth was expected to moderate to 2.98 per cent as, “economic growth will be subdued in 2023 due to strains on investment and low productivity in critical sectors.”

It stated that, “the services sector will drive economic growth, but this growth will not be strong enough to generate significant jobs. As a result, unemployment will remain unabated.”

In addition, it projected that inflation rate would average at 20.5 per cent in 2023.

It said: “Inflationary pressure is expected to remain elevated, driven by structural, cost and monetary factors. Food inflation will remain the fundamental driver of inflation due to the enduring impact of flooding, increased production costs due to increased cost of credit, insecurity and displacement. 

“The unemployment rate will increase to 37 percent and the poverty headcount will amplify to 45 percent due to weak performance in the job-elastic sectors, low labour absorption of sectors that will drive growth, and population growth estimated at 3.2 percent will lead to a decline in real per capita income.”

The NESG also projected that foreign capital inflow would decline in 2023 even though the “trade surplus will be sustained albeit lower, the foreign reserve will deplete further, and exchange rate pressure will persist.

“Due to political risks and a negative yield on investment, investors will take a flight to safety in other emerging and developed economies. An improvement in crude oil production will sustain the trade surplus.”

It said the Central Bank of Nigeria’s intervention in the FX market and shortage in FX inflow would culminate in a decline in foreign reserve to US$34.9 billion at the end of 2023 while monetary policy tightening would continue and the lending rate would remain high, and investment would be constrained.

“This could heighten financial risk and increase Non Performing Loans (NPL) in the banking system.

“Monetary tightening in 2022 has signaled an upward trend in interest rates. In addition, a faster increase in credit to the government will reduce credit availability to the private sector, “thereby supporting further increases in the cost of borrowing,” adding that “Nigeria’s sovereign risks are expected to amplify in 2023.”

The Chief Economist of NESG, Dr. Olusegun Omisakin, who commented on the report said, “these projections, along with the implementable policy framework provided in in the report, will guide policy-makers in addressing the challenges faced by the Nigerian economy and moving towards a path of shared prosperity.”