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IMF revises Nigeria’s economic growth downward due to weaker oil and gas production

The International Monetary Fund (IMF) has revised Nigeria’s economic growth downward by 0.3 percentage points due to weaker oil and gas production.

This was stated in the 2023 World Economic Outlook released on Tuesday, October 10 at its ongoing Annual Meetings in Marrakech, Morocco.

According to the Outlook, in Nigeria, growth is forecasted to decrease from 3.3% in 2022 to 2.9% in 2023, with a subsequent increase to 3.1% in 2024. This decrease is primarily influenced by the adverse effects of high inflation on consumption.

The 2023 forecast has been revised downward by 0.3 percentage points (pp), reflecting weaker oil and gas production, partially due to maintenance work.

Meanwhile, in sub-Saharan Africa, growth is anticipated to decrease to 3.3% in 2023 before recovering to 4.0% in 2024.

There have been downward revisions of 0.2 and 0.1 percentage points for 2023 and 2024, respectively. This growth trajectory remains below the historical average of 4.8%.

The decline in projection is attributed to various factors, including worsening weather shocks, the global economic slowdown, and domestic supply challenges, notably within the electricity sector.

Note also that the global growth rate is expected to decrease from 3.5% in 2022 to 3.0% in 2023 and further to 2.9% in 2024 on an annual average basis. In contrast, emerging markets, and developing economies are projected to experience a relatively modest decline in growth, going from 4.1% in 2022 to 4.0% in both 2023 and 2024.

There’s a slight downward revision of 0.1 percentage point for 2024 compared to the July 2023 WEO Update projection.

However, these average figures conceal regional disparities; while growth in two of the five main geographic regions is expected to rise in 2023 and then decline in 2024.

Additional context on Nigeria’s oil production

In an October 4 note from Citigroup Global Markets Limited, it was stated that although everyone can agree that increased oil production in Nigeria is a silver bullet, everyone also agrees that it is tough to see this materialize in the short run.

According to the Citigroup note, the scale of crude oil theft (100s of thousands of barrels per day) implies great organization, and high-level contacts, which is tough to break, considering the pay-out.

A part of the Citigroup note stated:

  • “And then getting companies to invest in aged infrastructure is tough. We’d therefore maintain an assumption of ~1.5 million barrels per day of production, anything more is upside.
  • “In the shorter run – we understood that most oil pre-export financing deals signed by the NNPC roll off in December: that should offer more direct oil revenues for the balance of payments.”

Going forward

The IMF Report cited earlier noted that going forward, multilateral cooperation is vital for achieving progress in dealing with the interlocking challenges holding back global recovery.

Collaborative efforts across various domains are essential, and it’s crucial to avoid further fragmentation in the global economic landscape as it could lead to costly delays.

A pressing concern is the imperative to rebuild confidence in multilateral frameworks.

This is vital to reinvigorate a system based on established rules that facilitate international cooperation, promote worldwide prosperity, and effectively govern potentially disruptive emerging technologies, including artificial intelligence.

At the core of these necessary reforms, a key focus should be on bolstering certainty in trade policies.

A clear, stable trade policy environment is paramount to provide businesses, investors, and nations with a predictable framework that encourages economic growth and fosters mutually beneficial international trade relationships.(NAIRAMETRICS)

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